Today the Semiconductor ETF (SMH) 20-day EMA crossed down through the 50-day EMA (Dark Cross), above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Yes, again! This is the fifth IT Trend Model signal change within the last four weeks--the seventh in six months. Because of the narrow trading range, this one is no more helpful than those prior signals. Note that the %Stocks > 20-, 50-, and 200-EMA are all below 30%, so this group is doing much worse than price action would indicate. It occurs to us that this sideways action could be a sign that distribution is taking place.
The weekly chart shows a breakdown from a parabolic advance, and SMH may be entering a high-level consolidation with the range between 200 and 280. If the support at 200 fails, the next likely support is at 160.
The DecisionPoint Alert Weekly Wrap presents an end-of-week assessment of the trend and condition of the Stock Market, the U.S. Dollar, Gold, Crude Oil, and Bonds. The DecisionPoint Alert daily report (Monday through Thursday) is abbreviated and gives updates on the Weekly Wrap assessments.
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MARKET/INDUSTRY GROUP/SECTOR INDEXES
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THE MARKET (S&P 500)
IT Trend Model: BUY as of 8/14/2024
LT Trend Model: BUY as of 3/29/2023
SPY 10-Minute Chart: The market traded in positive territory all day but lost ground in the final ten minutes of trading, making today a decline.
SPY Daily Chart: Even if price had stayed in the green today, it still would've formed a bearish filled black candlestick. Price is holding support at present, but we don't believe that will hold for much longer. The PMO has put plenty of margin between it and its signal line as it tumbles lower.
The VIX let up today, but was still very elevated, keeping it well below its moving average which is bearish. Stochastics are almost reading below 20. We don't want to see Stochastics drop below 20 as that is a sign of extreme weakness. Mega-caps are still holding sway as they continue to outperform the equal-weight RSP.
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S&P 500 New 52-Week Highs/Lows: We have the most New Lows we've seen in a year or possibly more. It looks like the High-Low Differential will drop below zero.
Climax* Analysis: There were no climax readings today.
*A climax is a one-day event when market action generates very high readings in, primarily, breadth and volume indicators. We also include the VIX, watching for it to penetrate outside the Bollinger Band envelope. The vertical dotted lines mark climax days -- red for downside climaxes, and green for upside. Climaxes are at their core exhaustion events; however, at price pivots they may be initiating a change of trend.
Short-Term Market Indicators: The short-term market trend is UP and the condition is EXTREMELY OVERSOLD.
Swenlin Trading Oscillators (STOs) are now extremely oversold so we should start looking for these oscillators to oscillate back toward the zero line. We wouldn't consider that a huge bullish vote of confidence because as we say, oscillators must oscillate. They always want to shift toward the zero line when they can. Our other two indicators are definitely oversold. Only 5% hold rising momentum!
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
At this point we are listing the ITBM and ITVM as oversold. They have seen readings lower than this so this isn't necessarily over. Only 12% of stocks have PMO BUY Signals. While this reading is oversold, we have seen more extreme readings before.
PARTICIPATION CHART (S&P 500): The following chart objectively shows the depth and trend of participation for the SPX in two time frames.
- Intermediate-Term - the Silver Cross Index (SCI) shows the percentage of SPX stocks on IT Trend Model BUY signals (20-EMA > 50-EMA). The opposite of the Silver Cross is a "Dark Cross" -- those stocks are, at the very least, in a correction.
- Long-Term - the Golden Cross Index (GCI) shows the percentage of SPX stocks on LT Trend Model BUY signals (50-EMA > 200-EMA). The opposite of a Golden Cross is the "Death Cross" -- those stocks are in a bear market.
The market bias is BEARISH in the intermediate and long terms.
Participation readings are now in oversold territory for %Stocks > 20/50EMAs. There's not much more ground left for them to move much lower, but they can. The Silver Cross Index and Golden Cross Index are in decline and because they are below their signal lines, the IT and LT Biases are BEARISH.
BIAS Assessment: The following table expresses the current BIAS of various price indexes based upon the relationship of the Silver Cross Index to its 10-day EMA (intermediate-term), and of the Golden Cross Index to its 20-day EMA (long-term). When the Index is above the EMA it is bullish, and it is bearish when the Index is below the EMA. The BIAS does not imply that any particular action should be taken. It is information to be used in the decision process.
The items with highlighted borders indicate that the BIAS changed today.
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CONCLUSION: We have plenty of oversold conditions that might imply an upside reversal ahead, but this time around is different in our opinion. The market started this decline from a place of weakness. There are no stocks out there to pick up the slack and push the index higher. Mega-caps could do this job, but we suspect the market is in for more downside. Most of the indicators could get more oversold so we can't hang our hat on oversold conditions. Additionally, oversold conditions can persist in a bear market setup. Santa could manage to prevent another dastardly decline, but again, with so much weakness within the index, it is hard to imagine it will reverse. Bargain hunters likely kept the market from collapsing today, but will they be there tomorrow?
Erin is 35% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin is pulling back but is still managing to hold its rising trend for now. The PMO looks quite negative and Stochastics are diving lower. Even the RSI moved into negative territory below net neutral (50). This rising trend is vulnerable.
BITCOIN ETFs
INTEREST RATES
Yields were mixed today. We have bull flags on most rates that suggest they will continue to make their way higher. The yield curve is getting less inverted.
The Yield Curve Chart from StockCharts.com shows us the inversions taking place. The red line should move higher from left to right. Inversions are occurring where it moves downward.
10-YEAR T-BOND YIELD
$TNX broke out strongly from the bull flag it formed out of the September low. The RSI has entered overbought territory so we should see a pause if nothing else, but given the strongly rising PMO, any decline would likely be temporary. Stochastics suggest there is still quite a bit of internal strength.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 12/13/2024
TLT Daily Chart: TLT broke down below two support levels today and we don't think it is done falling. The PMO is dropping below the zero line on a Crossover SELL Signal and Stochastics are holding below 20. The technicals look terrible and you can see the strong rising trend on the 20-year yield which will continue to put downside pressure on TLT.
Price actually dropped down through a support zone and now the next level of support doesn't arrive until price gets close to 84.50.
DOLLAR (UUP)
IT Trend Model: BUY as of 10/9/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar's rally is relentless and it continues to put pressure on metals and mining. It is also bad for large-cap companies that do overseas business. Unfortunately the technicals suggest this condition will persist. The PMO is rising on a Crossover BUY Signal that occurred well above the zero line and Stochastics are above 80 and still rising.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold managed a small rally today despite the rising Dollar, but we can see that ultimately relative strength is in decline against the Dollar so today was a bit unusual. The PMO has dropped beneath the zero line and the bearish rising wedge has executed. Stochastics are dropping below 20. We expect 235 to be tested with a distinct possibility that it will drop down to stronger support at 230.
Sentiment is still very bearish based on elevated discounts, but it doesn't seem to be bearish enough for an upside reversal.
GOLD MINERS (GDX) Daily Chart: With the Dollar surging, Gold Miners are going to continue to struggle right alongside Gold. They lost support at the November low and likely headed to strong support at 32. The PMO topped beneath the zero line and generated a Crossover SELL Signal. Participation is minuscule and Stochastics are holding below 20. There is far too much weakness here to look for an upside reversal.
CRUDE OIL (USO)
IT Trend Model: SELL as of 10/17/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Yesterday's comments still apply:
"Crude is stuck in a sideways trading range that is tightening. Indicators are mixed giving us a neutral condition. There is a Silver Cross IT Trend Model BUY Signal nearing as the 20-day EMA is about to cross above the 50-day EMA which gives us a bullish bias so maybe we will see price test the top of the range if nothing else."
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
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NOTE: The signal status reported herein is based upon mechanical trading model signals, specifically, the DecisionPoint Trend Model. They define the implied bias of the price index based upon moving average relationships, but they do not necessarily call for a specific action. They are information flags that should prompt chart review. Further, they do not call for continuous buying or selling during the life of the signal. For example, a BUY signal will probably (but not necessarily) return the best results if action is taken soon after the signal is generated. Additional opportunities for buying may be found as price zigzags higher, but the trader must look for optimum entry points. Conversely, exit points to preserve gains (or minimize losses) may be evident before the model mechanically closes the signal.
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