We have heard more than one person compare Trump's victory to Reagan's victory in 1980, where major policy changes were expected to greatly benefit stocks. Some suggest that we may see a repeat of what happened in 1981 and 1982. On the chart below we can see the quick rally that followed the Reagan win, then there was a mild bear market. We would not be surprised to see a similar retreat this year. It should be noted that a major bull market launched off the 1982 low.
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 double topped in the morning and prices shot lower. Just after lunch, a rally ensued. The 10-minute PMO is rising on a Crossover BUY Signal, but we do note that Stochastics have turned lower.
SPY Daily Chart: The bearish head and shoulders pattern has not yet been confirmed as support continues to hold. Price did drop below for a time, but ultimately closed above. The PMO continues to head lower toward the zero line. Total Volume was actually close to normal rather than very light volume associated with holiday trading.
The VIX is moving lower on our inverted scale suggesting we do have nervous investors right now. There seems to be some anticipation that we will be experiencing higher volatility moving forward. Stochastics are tumbling and could get below 20 soon which would be a sign of extreme weakness. Mega-caps are seeing weakness again as the relative strength line to equal-weight RSP declines.
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S&P 500 New 52-Week Highs/Lows: We saw one New High and New Lows have contracted somewhat. We checked and the High-Low Differential turned down again.
Climax* Analysis: There were no climax readings today. The prior downside exhaustion climax hasn't come through with higher prices. It has essentially been busted.
*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 OVERSOLD.
The Swenlin Trading Oscillators (STOs) are already in somewhat oversold territory. They can certainly get more oversold. It's not time to hang our hat on oversold conditions. We did see slightly more stocks above their 20-day EMA and a few more rising PMOs on a decline, but expansion was barely there.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is OVERSOLD.
The ITBM and ITVM are confirming the declining STOs. They are oversold, but as with STOs, they can get more oversold from here. We only have 13% of stocks with PMO Crossover BUY Signals, but the indicator is at least getting close to an upside crossover its signal line.
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.
We saw slightly more stocks above their 20/50EMAs, but we continued to lose ground on %Stocks > 200EMA. The Silver Cross Index continues to decline and given there are fewer stocks above their 50-day EMA, that condition will continue. The Golden Cross Index continues to decline as well and given there are fewer stocks above their 200-day EMAs than the Golden Cross Index, we can expect it to continue to lose ground. 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 only see one "Bull" bias on the Bias Table above and that is on the 'go nowhere' Semiconductor group. This is a sign of extreme short-term weakness that can't be ignored. STOs and the ITBM/ITVM are in decline and could definitely get more oversold so we aren't looking for an oversold bounce at this time. We don't see any bullish indications on any of our charts unless the nearly imperceptible upside changes to participation count. We don't think they count. The market is extremely weak and we are seeing problems with mega-cap performance. We are still technically in holiday trading, but weakness is pervading despite favorable seasonality. That is a bearish omen.
Erin is 35% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin appears to be finding support and is trying to rally higher once again. The PMO is beginning to turn up and Stochastics are rising strongly. We suspect we will get a possible rally to new all-time highs, but we need to see near-term resistance broken. Until then we could see more sideways trading. 90,000 seems to be providing the necessary support to rally from.
BITCOIN ETFs
INTEREST RATES
Yields were mostly lower. Short-term yields are definitely seeing a pullback and that could translate to declines in longer-term 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
$TNX definitely looks toppy right now, but support is still holding. In fact, we saw a very nice bounce off this support level the past two trading days. The PMO has turned back up, but Stochastics are falling and we have a bearish rising wedge formation developing. Short-term yields are beginning to fail so we do think $TNX will move sideways or possibly lower.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 12/13/2024
TLT Daily Chart: TLT is working very hard on a rally, but the 20-year yield hasn't really allowed it. We do see a declining trend developing on the 20-year yield so we should see a bit more upside out of TLT. It is still very weak based on the PMO being so far beneath the zero line so upside potential is limited.
DOLLAR (UUP)
IT Trend Model: BUY as of 10/9/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: So much for a weak Dollar and the bearish rising wedge. The Dollar leapt higher today pushing it out of the bearish chart pattern. This is especially bullish. The PMO has bottomed above the signal line well above the zero line suggesting we could see it move even higher. There is plenty of internal strength based on Stochastics. The only problem we detect is the overbought RSI, but we can see that condition can persist in this incredible rally higher. A stronger Dollar won't help mega-caps which generally do overseas business.
GOLD
IT Trend Model: NEUTRAL as of 12/23/2024
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: The reverse correlation between Gold and the Dollar did not hold today. The Dollar rallied strongly and Gold rallied more strongly. Price is back above the 20/50-day EMAs and the PMO is rising again. Stochastics are also making a move higher. Given the strength of today's rally that ignored the Dollar, we see a possible move toward prior price tops.
Discounts are very high and that often times can be good for Gold as extreme bearishness often begets bullish price moves. We don't want to get too bullish here, but certainly Gold has a positive set up right now.
GOLD MINERS (GDX) Daily Chart: Gold Miners loved the rally in Gold today and shot skyward. Price is still below the 200-day EMA, but we do see the PMO turning back up. Participation of stocks above the 20-day EMA exploded higher, pushing %Stocks > 20EMA above our bullish 50% threshold. There was also a nice bump in stocks above their 50/200-day EMAs. This looks encouraging, but the declining trend out of the October high is still holding. We do see that declining tops trendline as the top of a new bullish falling wedge. Maybe we're going to get a new leg up despite the rising Dollar.
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 rallied strongly, but it did form a bearish shooting star candlestick so we may see some profit taking. The indicators look very bullish so we should consider the resistance zone that is approaching to be somewhat weak. Still, USO has been in a sideways trading range for so long, it wouldn't be a surprise if it gets hung up there first. Energy and Crude seem to be the strongest choices going into January.
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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