After yesterday's Tech rout, traders came in to buy the dip. Price is still essentially running sideways on the Tech sector (XLK), but we do note a PMO Crossover SELL Signal triggered. Notice that participation really didn't register on today's rally. Only about 50% are above their 20/50-day EMAs. Stochastics are still tumbling. We aren't convinced that this sector will break out. The Silver Cross Index has topped as well. There is more work to do.
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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: Price held a rising trend all day long as it stair stepped higher. The 10-minute PMO has topped and is on a Crossover SELL Signal, but it is also flat above the signal line and that ultimately indicates strength.
SPY Daily Chart: This was a nice bounce off the 50-day EMA and the top of the prior declining trend channel. The PMO reversed higher today so we have a PMO bottom above the signal line which is especially bullish.
We got the expected bounce off the VIX's penetration of the lower Bollinger Band. The upper Band isn't that far away however so we could end up with an upside puncture which would indicate a likely decline. Stochastics have topped and are moving lower which does suggest we have a loss of some internal price strength. Today's rally was clearly precipitated by mega-cap gains as the relative strength line to RSP ticked higher. With mega-cap earnings on tap this week that relative strength line could get very interesting.
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S&P 500 New 52-Week Highs/Lows: As expected we saw more New Highs on the rally. The High-Low Differential looks very bullish on its deliberate rise higher above the zero line.
Climax* Analysis: There were no climax readings today, but we note that, while price was up today, SPX Net A-D and SPX Net A-D Volume were both negative.
*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.
The Swenlin Trading Oscillators (STOs) are still in decline which has us concerned that the rally may not see much followthrough. Big news is that participation of stocks above their 20-day EMA dropped on the rally as did %PMOs Rising.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
So far so good for the ITBM and ITVM which are rising and are not overbought yet. We saw %PMO Xover BUY Signals top today.
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.
Participation contracted across the board today on a solid rally. The broad market is seeing some deterioration. Readings are still somewhat healthy, but we don't want to see them contracting on a rally. The Silver Cross Index still looks very bullish on its rise. It is holding above its signal line so the IT Bias is BULLISH. The Golden Cross Index is still falling and because it is below its signal line, the LT Bias is 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 a strong rally today but noticed deterioration on some of our indicators. The STOs continue to fall, but what is most worrisome is the drop in participation on a strong rally. This suggests there are cracks in the foundation for the broad market. We saw negative Net A-D and Net A-D Volume that puts new light on the rally today. The PMO did turn back up, but Stochastics are still decline. The market is vulnerable to a downturn and could see weakness ahead. Today seemed more about the NVDA recovery rather than base building in the broad market. Tomorrow we have the FOMC rate decision and earnings from Mag 7 members MSFT, META and TSLA. This could cause turbulence particularly if earnings are not received well. The market needs the Mag 7 to stay healthy if it is going to reach new all-time highs.
Erin is 50% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin continues to pull back toward support. This current level of support doesn't look very sturdy so we would look for a test at 90,000. The PMO is declining again and Stochastics are in decline.
BITCOIN ETFs
INTEREST RATES
Yields were mixed today. We see most yields in pause mode and would look for a bit more pullback on all yields.
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
Yesterday's comments still apply:
"We now have a bearish head and shoulders pattern on $TNX that implies we will see a breakdown that could take it down below 4.3%. The rising trend still looks good, but this pattern combined with the dropping PMO and Stochastics suggest more pullback ahead."
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 12/13/2024
TLT Daily Chart: We would look for more upside out of TLT. There is a bullish reverse head and shoulders. It was confirmed with yesterday's breakout. The RSI is now in positive territory and Stochastics have moved above 80. The minimum upside target of the chart pattern would bring price close to 91 or 92.
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 is bouncing off the 50-day EMA and could see more upside from here. However, we do note the declining trend is still intact and the PMO is still in decline. Stochastics below 20 indicates internal price weakness so while this looks like a possible rally starting, weakness suggests we will not see much upside.
GOLD
IT Trend Model: BUY as of 1/10/2025
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold showed relative strength today as it was up while the Dollar was also up. This implies more buyers came in. We think we'll see new all-time highs for Gold soon. The indicators are still very positive.
GOLD MINERS (GDX) Daily Chart: Gold is on track for new all-time highs so we would expect GDX to rally in concert. Participation is at healthy levels and the Silver Cross Index is reversing higher. Stochastics have taken up residence above 80 so there is plenty of internal price strength as well. The PMO is now rising in positive territory so we should see this rally continue.
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 managed a rally today, but it did nothing to improve this bearish chart. The declining trend is still very much intact and the PMO is falling on a Crossover SELL Signal. Look for more downside on Oil.
As noted yesterday, we see a decline ahead that could take price all the way down to 70 or further. Inverse ETFs related to Crude might be worth considering.
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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