Today the Technology Sector (XLK) 20-day EMA crossed down through the 50-day EMA (Dark Cross), above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Price is essentially in a trading range. The PMO has dropped into negative territory and we can see that participation is sickly. Participation is trending lower and the Silver Cross Index has topped. Support is vulnerable.
On the weekly chart XLK has a bearish rising wedge, which we normally expect to resolve to the downside. The weekly PMO is declining.
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Also today, the Utilities Sector ETF (XLU) 20-day EMA crossed up through the 50-day EMA (Silver Cross), generating an IT Trend Model BUY Signal. This doesn't look like a signal that will stick around. EMAs are moving sideways with price. A drop beneath the 50-day EMA would quickly put this signal in jeopardy. The PMO is rising and we do see participation expanding somewhat. There is certainly opportunity for expansion, but currently we have a declining trend. This signal is weak.
On the weekly chart XLU seems to be consolidating on support at 74. Price bounced off a support zone, but the weekly PMO is still declining.
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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 decline on tariffs opened the day but good news was received that Mexico's tariff would be delayed by one month. This did help the market reverse and claw back losses, but price began to fail to end the day. The 10-minute PMO is topping beneath the zero line.
SPY Daily Chart: The two declines can be assigned to outside forces. Price has now formed a bearish double top and today's decline confirmed the pattern. The PMO has now topped. The RSI very nearly entered negative territory below net neutral (50). Total Volume was solid on the decline.
The VIX punctured the lower Bollinger Band on our inverted scale. These punctures will often lead to some upside, but we don't like the configuration of Stochastics. We note that the relative strength line to equal-weight RSP is trending lower. This means that mega-caps are underperforming. This condition generally means a weak market.
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S&P 500 New 52-Week Highs/Lows: New Lows expanded quite a bit today overcoming the amount of New Highs. The High-Low Differential topped today before reaching overbought territory.
Climax* Analysis: There was only one climax reading on the four relevant indicators, so we do not have a climax day.
*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.
Swenlin Trading Oscillators (STOs) continue to decline with both sitting in negative territory now. Participation is melting away as we continue to lose stocks above their 20-day EMAs. Rising momentum has been hit hard.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
Since Friday both the ITBM and ITVM have moved lower bringing damage to the intermediate term. Three quarters of the index hold PMO Crossover BUY Signals, but with only half showing rising PMOs, the indicator will begin dropping quickly.
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.
The Silver Cross Index may be rising, but we doubt it will do so much longer as we continue to lose participation of stocks above both their 20/50-day EMAs. Price needs to be above the 50-day EMA to preserve a Silver Cross. The Silver Cross Index is above its signal line so the IT Bias is BULLISH for now. The Golden Cross Index has topped again and looks weak. We now have fewer stocks above their 200-day EMA than the amount of Golden Crosses so it could continue lower from here. The Golden Cross Index is below its signal line so the LT Bias remains 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: Indicators are deteriorating. Participation is leaking out of the market. New Lows popped today. The STOs are in decline alongside the ITBM and ITVM. Certainly tariffs are unwelcome to the market and this could continue to put downside pressure on price. The market is still terribly overvalued and we were already seeing problems with rising PMOs and PMO BUY Signals. The only positive today would be the VIX penetrating its lower Bollinger Band, but let's face it, the Bands are very tight so we shouldn't really put too much emphasis on it. Still, this does tell us we could see a small bounce. However, with indicators configured negatively, we don't expect much upside if any.
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 was lower much of the day, testing support at 90,000. The test was successful and Bitcoin looks headed back toward the top of the current trading zone. The PMO is turning back up, but is essentially flat near the zero line so we have a neutral condition. We would look for more consolidation.
BITCOIN ETFs
INTEREST RATES
Yields were mostly higher on the day. They are in declining trends currently so they may be pulling back a bit further. We aren't expecting deep declines, probably more gyrations sideways.
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
$TNX continues to hold its rising trend, but it is very vulnerable. There is support at the neckline of the head and shoulders pattern and the 50-day EMA. Due to the head and shoulders and declining PMO, we would look for a breakdown rather than a breakout.
BONDS (TLT)
IT Trend Model: NEUTRAL as of 11/10/2024
LT Trend Model: SELL as of 12/13/2024
TLT Daily Chart: TLT is rising out of a bullish reverse head and shoulders pattern. The 20-year yield is in a declining trend so we do expect to see more upside for Bonds. The PMO is still rising gently and Stochastics are still above 80.
Today we saw a breakout above resistance at the November low.
DOLLAR (UUP)
IT Trend Model: BUY as of 10/9/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Price is rallying out of a bull flag formation. The RSI is positive and not overbought despite the recent rally. The PMO has now turned up and Stochastics have hit positive territory above net neutral (50). We see more upside ahead for the Dollar.
GOLD
IT Trend Model: BUY as of 1/10/2025
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: With such a bullish Dollar, we would expect Gold to be floundering. Instead it is putting on its own rally and continues to set new all-time highs. Notice that the relative strength line to the Dollar is rising. Stochastics are rising above 80.
Gold's volatility index ($GVZ) holds a rather high reading and that is a condition that can help Gold. At this time we expect Gold to continue higher, but it may be time for a pause.
GOLD MINERS (GDX) Daily Chart: We see a large double bottom on Gold Miners and the recent rally took price above the confirmation line at the December high (middle of the "W" of the pattern). We like Gold so we consequently like Gold Miners. The technicals are ver strong with the Silver Cross Index rising strongly and participation above key moving averages is robust. Gold is due for a pause, but for now we will enjoy the rally higher.
CRUDE OIL (USO)
IT Trend Model: BUY as of 12/24/2024
LT Trend Model: BUY as of 1/10/2025
USO Daily Chart: The decline is slowing as price attempts to find support at the December gap and the 50-day EMA. The PMO continues to make its way lower along with Stochastics. We could see some more consolidation, but ultimately we expect price will continue to move lower due to the current administration's pro-fossil fuel production.
Price hit the top of a very long-term trading range so it isn't surprising to see the correction. It's time for price to test the bottom of the range and that is where we believe it is headed.
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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