SPY 10-Minute Chart: There was a brief pop higher to begin trading, but the rest of the day saw the market slide much lower basically taking back all of yesterday's gains and then some. Trading was uninspired to finish the day yesterday which set the stage for today's difficult decline.
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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 Daily Chart: The bullish double bottom pattern is still in force. It will not bust until price drops below the prior bottoms. Today's bearish engulfing candlestick suggests that the pattern may indeed bust. The PMO is back on a decline and the RSI is back in negative territory.
The VIX saw a spike lower on our inverted scale, placing it below its moving average which implies weakness and new concern by investors. Stochastics are still rising which is bullish but the decline in the PMO is a problem. It has topped beneath the signal line and that is especially bearish.
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S&P 500 New 52-Week Highs/Lows: New Highs saw a slight expansion, but New Lows really made an appearance. On the bright side, the High-Low Differential is rising again and could hit positive territory very soon.
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 DOWN (Declining trend has not been broken) and the condition is OVERSOLD.
Despite a deep decline, the Swenlin Trading Oscillators (STOs) continued to rise today. Participation lost ground today as we would expect and remains at a low 28% reading. We saw fewer rising PMOs as we would expect.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
The ITBM and ITVM continued their rise again today, but the change was very slight. They appear ready to turn down once again. Interestingly we did see another percentage point gain on %PMO Xover BUY Signals.
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 term timeframes.
Participation readings are attempting to reverse out of oversold conditions. They remain weak suggesting there aren't that many bullishly biased charts out there. The Silver Cross Index is falling and is below its signal line so the IT Bias remains BEARISH. The Golden Cross Index is also in decline and below its signal line so the LT Bias is BEARISH. The Silver Cross Index is getting oversold, but still has more ground it can cover based on the 2023 market low that brought it below 20%.
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: Considering the depth of today's decline, it was surprising to see both the STOs and ITBM/ITVM rising. Another decline will likely reverse them but for now they do make today's deep decline look more benign. Mega-caps built the market up yesterday, but today failed with NVDIA (NVDA) down over 6% today as an example. They could continue to cause trouble as tomorrow might bring in "buy the dippers". Overall today's decline has us more cautious. We aren't going to go completely bearish given the still rising STOs and ITBM/ITVM, but we are close to it as we've viewed January as a likely reckoning of an overvalued market. The FOMC minutes will be released tomorrow and there are reports that could shake investors if they don't go the right way. Conversely we've seen rallies when they do go the right way. More emphasis seems to be shifting back to the FOMC so we should be ready for turbulence.
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 was down with the overall market today. It canceled out yesterday's breakout. The PMO has topped beneath the signal line which is especially bearish and Stochastics left territory above 80. We are starting to think we will see more sideways movement. We still believe sentiment is bullish enough to prevent a serious breakdown, but Bitcoin has a way of surprising.
BITCOIN ETFs
INTEREST RATES
Yields were higher on the day and given the upcoming Bonds hitting the market soon, they could continue to expand from here. Short-term yields are consolidating sideways essentially, but they are beginning to look more bullish and could continue to make their way higher.
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 above the bearish rising wedge which is especially bullish. The RSI is overbought now so it is vulnerable to some decline, but given the PMO surge above the signal line and rising Stochastics, we suspect there is more upside to be had.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 12/13/2024
TLT Daily Chart: Yesterday's comments still apply:
"With long-term yields back on the rise, Bond funds are going to struggle and TLT is no exception. Support has been lost from the tight sideways move. The PMO is still in decline and the RSI is very negative. Stochastics are flat below 20 signifying strong internal price weakness."
The next level of strong support will arrive at 84.50 but we think that level is still vulnerable.
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 rallied today forming a bullish engulfing candlestick that implies it will rally again tomorrow. The current rising wedge can soon be redrawn to include the last price top. That would still be a bearish rising wedge. The RSI is still positive but the other indicators are beginning to show signs of stress. The PMO has topped and Stochastics dropped below 80. We are looking for the rising bottoms trendline to be broken.
GOLD
IT Trend Model: NEUTRAL as of 12/23/2024
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: We're seeing the Gold chart as bullish right now. It is still essentially traveling in a sideways trading range, but it looks ready to test the top of the range. The RSI just moved into positive territory and the PMO is on a new Crossover BUY Signal. Stochastics are rising as well. We are bullish on Gold.
A weaker Dollar should help Gold. The reverse correlation is holding so if we're right about the Dollar, the correlation suggests Gold should benefit as it usually does.
GOLD MINERS (GDX) Daily Chart: We are bullish on Gold so we have to be bullish on Gold Miners. We do have a PMO Crossover BUY Signal and participation is beginning to expand again. The Silver Cross Index is rising toward a Bull Shift across the signal line. Stochastics are also rising. It is very early and the declining trend is still intact so there is still downside risk.
CRUDE OIL (USO)
IT Trend Model: BUY as of 12/24/2024
LT Trend Model: SELL as of 9/10/2024
USO Daily Chart: Crude Oil is nearing overhead resistance. The RSI is almost overbought so we could see a pause now that we are so close to resistance, but the PMO looks very bullish as do Stochastics so we are looking for an eventual breakout.
The top of the longer-term trading range won't arrive until about 83.
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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