Today's CPI print suggested that inflation is not that sticky. This opened up the possibility of a FOMC rate cut in March. The market loved this and the Magnificent Seven led the way.
Below is an ETF made up of only the Magnificent Seven. We can see the strong rally, however price is still in a declining trend channel. Bulls could look to this as a flag formation that would imply even higher prices should we get the breakout. The RSI just moved into positive territory and Stochastics are rising again. The PMO is still technically in decline, but it did decelerate today. We still find this declining trend channel worrisome, but we will watch to see if we get a breakout that would execute the bull flag.
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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: As noted in the opening, the positive CPI report goosed the market on the open and it basically trended up after a brief decline before lunch. The 10-minute PMO and Stochastics don't look that promising, but we did see some excellent improvement on many of our indicator charts.
SPY Daily Chart: Like the MAGS chart we opened with, the SPY is still in a declining trend channel. Today's gap up move does look promising. The RSI is back in positive territory. We also see a slight positive OBV divergence with price that also looks promising.
The VIX powered above its moving average on the inverted scale and Stochastics turned back up. This tells us we have renewed strength in the very short term.
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S&P 500 New 52-Week Highs/Lows: New Highs popped today implying that the broad market is getting involved again. The High-Low Differential has turned back up.
Climax* Analysis: There were three climax readings on the four relevant indicators, and solid SPX Total Volume confirming, so we have an upside initiation climax.
*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 DOWN and the condition is NEUTRAL.
Both Swenlin Trading Oscillators (STOs) are rising now as the STO-V reversed higher today. Participation shot up on the rally also suggesting the broad market is participating again. We now have 70% of the index holding rising momentum which could support higher prices.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
The ITBM and ITVM look bullish too as both are rising toward the zero line. More PMO BUY Signals are coming in, but %PMO Xover BUY Signals is still below our bullish 50% threshold. Still, this is what we need to see.
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.
The big news is that the Silver Cross Index turned up. It could continue rising now that we have more stocks above their 20/50-day EMAs versus the Silver Cross Index percentage. The Golden Cross Index has work to do before it will turn up. We need more participants above their 200-day EMA. At this point it is still reading below the Golden Cross Index. Both the Silver Cross Index and Golden Cross Index are below their signal lines so 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 had already begun to see improvements in participation and PMO configurations so the stage was slowly being set for a possible rally. Today we saw confirming readings on nearly every indicator. Today's upside initiation climax also suggests we will see prices rally further. Mega-caps had been underperforming but today they outperformed pushing price higher on the SPY. However, it isn't just the mega-caps that got involved today, the broad market appears to be coming back into the fold. We do have concern about the declining trend channel, but today's gap up rally does appear to be real in spite of being triggered by the CPI report. The job market will be back in the spotlight tomorrow with the Initial Jobless Claims revealed. This has been a sticking point of late as it is very resilient. The Fed needs to see deterioration. If the report suggests the job market is healthy, the market could see a downturn.
Erin is 30% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin is rallying off support, but the rounded top is still in force. If the market does rally, Bitcoin will likely benefit so we see support as fairly strong right now. The RSI is positive and the PMO is back on the rise. Bitcoin isn't out of the woods, but it is looking a bit more healthy.
BITCOIN ETFs
INTEREST RATES
Yields plunged today on good news about inflation. We could see this condition continue if economic reports impress the Fed and the market again. Falling yields are positive for the market and Bond funds.
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 crashed today. We saw a breakdown from the bearish rising wedge and the PMO topping. The RSI also plunged. Stochastics dropped below 80. We would look for support at 4.5% to be tested at this point.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 12/13/2024
TLT Daily Chart: With the plunge in yields, Bond funds celebrated with strong rallies. Price nearly overcame near-term resistance on today's move. Stochastics are rising again as is the PMO so we could see more rally ahead.
Long-term support was essentially met with yesterday's decline so this rally is coming off a strong support level. While we see higher prices ahead for TLT, we aren't overwhelmingly bullish as we think upside potential will likely be limited with the declining trend out of the September top likely holding strong. Time will tell.
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 had another decline today but did form a bullish hollow red candlestick. This rising trend could hold despite it being the bottom of a bearish rising wedge. Indicators are beginning to break down so overall we are bearish on the Dollar.
GOLD
IT Trend Model: BUY as of 1/10/2025
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is quietly making its way higher along a gently rising trend. Overhead resistance is arriving soon, but with the Dollar showing signs of stress, we think Gold has a good chance of breaking out. The RSI is positive and the PMO is on the rise. Stochastics are even turning up above 80.
Given we have a bearish outlook on the Dollar, Gold needs to see a negative correlation with the Dollar again. At this point, we don't see any rising relative strength against the Dollar. Gold is configured bullishly and we do believe if the Dollar loses ground that Gold will benefit. It hasn't really been hurt by the strongly rising Dollar so far and that is bullish.
GOLD MINERS (GDX) Daily Chart: Gold Miners are likely to continue rising given the positive outlook for Gold. The indicators look very good. Notice the Silver Cross Index is rising almost vertically. Participation is robust and Stochastics are rising. We got the expected upside breakout from the bullish falling wedge. We see higher prices ahead for Gold Miners and Miners in general. If the Dollar would break down, we could really get this rally going.
CRUDE OIL (USO)
IT Trend Model: BUY as of 12/24/2024
LT Trend Model: BUY as of 1/10/2025
USO Daily Chart: Crude rallied strongly today. It is very overbought right now, but the PMO looks incredibly bullish right now. Stochastics are rising above 80.
Overhead resistance was finally broken. The next level of resistance can be seen on the weekly chart.
Weekly Chart: This is the first time in years that we've seen USO at this level. It looks bullish enough to continue its climb, but we suspect it will not be able to overcome resistance at the 2022 high. Part of the reason is the new Crude friendly administration coming in next week. More production will mean lower prices.
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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