Today the Semiconductor ETF (SMH) saw a small breakout. We did technically see a breakout at the last top, but price never closed above the trading range. This looks a little more encouraging. However, there is overhead resistance at all-time highs coming up fairly soon. Working in its favor is the very strong participation readings of stocks above their key moving averages. It has been moving up and is now at very robust levels. The Silver Cross Index is angling higher and Stochastics are almost above 80. We see some upside potential here but have to wonder whether it will have enough steam to overcome the next level of resistance.
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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: Post inauguration the market saw a nice steady rally whereas Friday's rally looked as if prices were going to continue lower as price topped. The 10-minute PMO has turned up and Stochastics are above 80 which bodes well.
SPY Daily Chart: Price is inching its way higher toward all-time highs. Today the PMO had a positive Crossover BUY Signal above the zero line. The OBV bottoms are rising with price, confirming the rally for now.
The VIX is making its way higher on our inverted scale as investors are becoming more comfortable with the current rally. Stochastics just moved above 80 which implies internal price strength.
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S&P 500 New 52-Week Highs/Lows: New Highs popped higher today suggesting good broad market participation. The High-Low Differential moved above the zero line.
Climax* Analysis: On Friday there was a rather weak upside exhaustion climax, but today's upside exhaustion climax was much more forceful. All four relevant indicators had solid climax readings, and SPX Total Volume was a solid confirmation.
*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 OVERBOUGHT.
Swenlin Trading Oscillators (STOs) look very bullish with one problem. They are now overbought and that leaves us nervous about the endurance of the rally. We do have very strong participation readings of stocks above their 20-day EMA. Nearly 90% now have rising momentum which could certainly carry the market higher.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Today the ITBM hit positive territory and the ITVM continued to move higher. This confirms already rising short-term indicators. The zero line has been a problem for these indicators of late. We now have 69% of stocks holding PMO BUY Signals. That is a very good reading that definitely suggests that the broad market has kicked it into gear.
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 BULLISH in the intermediate term.
The market bias is BEARISH in the long term.
We have now seen a Bull Shift on the Silver Cross Index as it had a positive crossover its signal line. Participation readings are excellent right now and continuing to move higher. %Stocks > 20EMA is starting to get close to overbought territory, but for now the reading is very good and could certainly move higher. The Silver Cross Index is above its signal line so the IT Bias is BULLISH. The Golden Cross Index did turn up but remains below its signal line for a BEARISH LT Bias. The Golden Cross Index reading itself is healthy.
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: The Bias Table above saw quite a few "Bull" additions today so short-term we do see the market shifting in the right direction. Indicators are rising and we got a new PMO Crossover BUY Signal on the SPY. Participation is at healthy levels and we see positive internals as more rising PMOs and PMO BUY Signals are added to the market. There are two small problems. First STOs are now overbought. Second, today saw an upside exhaustion climax. We suspect that market has more upside in it, but we should be on the lookout for some churn off this climax. Economic reports are quiet for now so we'll see what this market has in it without the help (or hindrance) of those reports.
Erin is 45% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin rallied today but remains below overhead resistance. The declining trend out of the December high was broken and the PMO is picking up speed to the upside. This looks like a good time for an upside breakout. Although Stochastics do temper our bullish outlook.
BITCOIN ETFs
INTEREST RATES
Yields are falling and could continue to as they are declining more rapidly out of previous tops. We think they will likely continue to cool.
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 confirmed its bearish rising wedge with a breakdown. It is now headed to support at the November high. The new PMO Crossover SELL Signal does not bode well and Stochastics are dropping vertically. We do think support will be tested at 4.5%. That level is certainly vulnerable based on the indicators.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 12/13/2024
TLT Daily Chart: Bonds are enjoying some time in the sun with yields on the decline. The 20-year yield looks bearish in its declining trend. The RSI just hit positive territory and the PMO is on a new Crossover BUY Signal. Look for Bond prices to continue to move upward. Overhead resistance is arriving at 89.00. That could be the point where yields tip back up so upside potential could be limited.
DOLLAR (UUP)
IT Trend Model: BUY as of 10/9/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: It finally happened. The Dollar broke below its strong rising bottoms trendline, executing the bearish rising wedge. It's time for it to unwind and given the PMO's margin between it and its signal line is expanding with diving Stochastics, we think it will continue to move lower from here.
GOLD
IT Trend Model: BUY as of 1/10/2025
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold is traveling within a gently rising trend channel but appears ready to break out of it now that it has overcome resistance at the prior two highs. Still we will be ready if it turns down here. It shouldn't given the positive configuration of the RSI and PMO. Stochastics are also strong above 80. The Dollar is looking more weak as well.
The correlation between Gold and the Dollar is still positive so a falling Dollar may not necessarily mean we'll see rising Gold prices, but if today is any indication, we do think Gold will ultimately benefit from a weak Dollar as it usually does.
GOLD MINERS (GDX) Daily Chart: With Gold looking bullish, we have to be bullish on Gold Miners. GDX is on a steady rising trend and participation readings are strong and not really overbought yet. The Silver Cross Index looks especially bullish. If Gold runs into trouble at the top of its rising trend channel, GDX will likely struggle too, but for now it looks very bullish.
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 Oil is pulling back and given the new Executive Orders regarding a national energy crisis pushing for more drilling, prices are likely to continue to pare back in sympathy. There is a support zone available right now and the PMO hasn't turned down yet.
We have hit strong overhead resistance at this level so a pullback seemed likely anyway and that is what we're getting. We would look for prices to move down further.
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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