Today two defensive sectors led today, up over 2.5% on a day where the SPY lost ground. Generally defensive sectors are where investors hedge their bets on the market. When they begin to show leadership, the market could be weakening internally.
The big move today in leader XLU came after a PMO BUY Signal yesterday. You'll notice we have a double bottom formation and today's rally pushed it above the confirmation line of the pattern suggesting we'll see more upside. Participation shot up on the rally. This will push the Silver Cross Index higher toward a Bull Shift across the signal line. Stochastics are rising sharply and we can relative strength picking up against the SPY.
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 didn't do much today moving mostly sideways. As price consolidates, the 10-minute PMO is moving lower. It remains below its signal line so we could see trouble on tomorrow's open.
SPY Daily Chart: Price is in a declining trend channel, but we do note the positive OBV divergence that led into the current rally. That usually means the rally will see followthrough. The PMO continues to rise and the RSI is now in positive territory.
The VIX lost ground on our inverted scale, but it does remain above its moving average which means some strength is available. Stochastics are rising again, but do sit in negative territory for the moment. Notice the relative strength line to equal-weight RSP. Mega-caps lost ground today and likely were the culprit for a less than stellar trading day.
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S&P 500 New 52-Week Highs/Lows: New Highs expanded on the decline which does suggest to us that the broad market is getting more healthy. The High-Low Differential is rising, but it does remain below the zero line.
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 and the condition is NEUTRAL.
The Swenlin Trading Oscillators (STOs) are rising and we saw some excellent expansion in participation of stocks above their 20-day EMA. Additionally we have far more rising PMOs. Both of these readings are robust and suggest that broad market participation is expanding.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
The ITBM and ITVM continue to rise out of negative territory. Most importantly %PMO Xover BUY Signals is now over our 50% bullish threshold.
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 is definitely improving under the surface and certainly suggests that the broad market is participating. The Silver Cross Index is now rising toward a Bull Shift across the signal line. The Golden Cross Index is still vulnerable to more decline because we have fewer stocks above their 200-day EMA than those with Golden Crosses. Both the Silver Cross Index and Golden Cross Index are below their signal lines to 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: After yesterday's upside initiation climax we would have expected to see a positive close or at least a rising trend in trading today. Interestingly on the decline, participation expanded greatly as the broad market is starting to participate. The decline today was likely due to faltering mega-caps and Technology, but under the hood indicators look good. Our main concern is that trading was very lackluster today so we could see price continue to move down in its declining trend channel. Yet our portfolios (minus mega-caps) should be okay given participation numbers are improving. Tomorrow is options expiration so we should expect low volatility and very high volume.
Erin is 30% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
The rounded top and the recent declining trend are intact and put a bearish spin on Bitcoin right now. On the bright side, we do have a PMO Crossover BUY Signal on tap and Stochastics are rising strongly. We'll look for support to hold for now. If the indicators start getting bearish, all bets are off.
BITCOIN ETFs
INTEREST RATES
Yields are in pullback mode and given the deep decline we suspect it isn't over yet. Rising trends on longer-term yields are in jeopardy.
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 continued to spiral lower today after breaking down from a bearish rising wedge. The PMO has topped and Stochastics are dropping vertically. We are looking for support to be tested at 4.5%.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 12/13/2024
TLT Daily Chart: With yields declining, Bond funds have had a chance to rally finally. Given yields are looking very bearish right now, we suspect that TLT will continue to rally here. We would look for a possible test of the top of the declining trend channel at best. We think the decline in yields is temporary.
The next level of resistance lies at 88.00.
DOLLAR (UUP)
IT Trend Model: BUY as of 10/9/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: We continue to monitor the bearish rising wedge on the Dollar. It implies we will see this rising trend finally broken. The PMO is on a Crossover SELL Signal, but at this point we can only chalk it up to diminishing strength, not necessarily new weakness. We believe we will see the breakdown given the drop in Stochastics, but we can't discount the strength of this rising trend.
GOLD
IT Trend Model: BUY as of 1/10/2025
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold has now reached overhead resistance at the prior tops. It looks good to keep up the rally despite the strong Dollar. We are looking for a test of the all-time highs from October now. The PMO is rising nicely and Stochastics are above 80. We can also see the relative strength line to the Dollar is rising again.
Discounts continue to decline suggesting investors are getting a little more bullish on the metal.
GOLD MINERS (GDX) Daily Chart: Price continues to work its way out of the bullish falling wedge. Despite a gain in Gold, GDX saw a small decline. Overall they look very healthy under the hood. The Silver Cross Index is rising quickly now on a BULLISH bias. Stochastics are above 80. We expect more upside out of the Gold Miners.
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 was lower on the day, but the rising trend is still very much intact. Given we are at the top of the long-term trading range, it isn't surprising that we would see some hesitation. The decline nearly took the RSI out of overbought territory which would be welcome. We are bullish on Crude but with resistance so close, it may be time for a downturn.
Overhead resistance was essentially broken. The next level of resistance can be seen on the weekly chart.
Weekly Chart: Yesterday's comments still apply:
"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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