Today the Transportation ETF (IYT) 20-day EMA crossed down through the 50-day EMA (Dark Cross), above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. It is traveling mostly sideways but we spy a bearish double top that suggests this area of support is vulnerable. The PMO has dropped below the zero line and Participation remains slim. Stochastics look terrible holding below 20. We'd look for more downside.
On the weekly chart IYT is testing the bottom of a bearish rising wedge. The weekly PMO is dropping and putting margin between it and its signal line right now so this tiny breakdown is likely to see followthrough.
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: Friday's final rally turned out to be a fake out. The market attempted a bullish flag but broke down instead of out. We did see a late day reversal, but it was too little too late.
SPY Daily Chart: We have a giant bearish engulfing candlestick on the daily chart that doesn't bode well. The PMO has dropped below the zero line and the RSI is negative and not oversold. With more tariff talk, the market is getting antsy.
The VIX continues to penetrate the lower Bollinger Band on the inverted scale. We often times get upside reversals on these breakdowns, but volatility was so low the Bands shrank and left it open for multiple drops beneath the lower Band. Stochastics are flashing weakness as they are reading below 20. Total Volume was solid on the decline. The relative strength line of the SPY to equal-weight RSP continues to drift lower as mega-caps weaken further.
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S&P 500 New 52-Week Highs/Lows: Very strange look on New Highs/New Lows. We did see quite a few New Highs on the decline, but remember this is an intraday reading so many of those could have been lost by day's end. The expansion of New Lows is in line with today's deep decline. The High-Low Differential is looking toppy right now.
Climax* Analysis: Today there were three climax readings among the four relevant indicators, which gives us a downside initiation climax. SPX Total Volume contracted but was still 134% of the one-year daily average. We note that today's downside climax comes immediately after Friday's upside climax, and we're inclined to believe today's.
*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) were mixed on the day as the STO-V switched direction and moved lower. Participation lost ground as expected and we lost quite a few rising PMOs. Now more than half of the index hold declining PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM reversed direction today and now both are moving lower. We now have more than half of the index holding PMO SELL Signals.
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.
Negative divergences are playing out as expected with a market decline. Readings are not anywhere close to oversold so we would expect more stocks to lose support at those key moving averages to bring the indicators down to oversold territory. The Silver Cross Index has topped beneath its signal line. It is below its signal line so the IT Bias is BEARISH. The Golden Cross Index has twice topped beneath the signal line. The LT Bias is BEARISH given the Golden Cross Index is below its signal line.
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 will admit to being somewhat fooled by Friday's late day rally and upside initiation climax. The market struggled to hold in positive territory today and by the end of trading, price fell apart. Bearish biases are filling up our Bias Table above. STOs are mixed and the ITBM and ITVM are topping so internals are poor; not to mention Stochastics which are weak below 20. Participation is weak and not close to oversold yet. Today's downside initiation climax is very believable given those conditions. With the short-term trend being down, look for lower prices.
Erin is 10% long, 0% short. (This is intended as information, not a recommendation.)
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CALENDAR
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BITCOIN
Bitcoin surged over the weekend on news of a U.S. Cryptocurrency Reserve. How that will look we don't know. The surge was taken care of quickly as all of those gains were returned in trading today. Bitcoin still looks very weak. We have a PMO top beneath the signal line and a negative RSI. Stochastics are technically rising so maybe this support level will hold a bit longer. Ultimately, the bearish double top suggests a minimum downside target to 75,000 so there is a high likelihood we'll see even lower prices.
BITCOIN ETFs
INTEREST RATES
Yields are tumbling and we believe they will continue to make their way lower toward support. That is where we would look for an upside reversal, but there is further to fall.
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 is very weak as it continues to quickly make its way lower. Strong support is arriving at 4.1% so we should look for a possible bounce there or at least a pause.
BONDS (TLT)
IT Trend Model: BUY as of 2/25/2025
LT Trend Model: SELL as of 12/13/2024
TLT Daily Chart: Bonds are making their way higher and should reach overhead resistance at 94 soon. With yields looking so bearish, we are expecting a breakout there. The indicators are extremely strong and the RSI is not yet overbought. Stochastics look very bullish as they are holding above 80. Short-term we think Bonds have more rally ahead.
The breakout from the declining trend channel was especially bullish.
DOLLAR (UUP)
IT Trend Model: BUY as of 10/9/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The bearish double top is still in force on the Dollar. It was looking pretty good on Friday and tariff discussions have led to a small rally, but today in spite of the focus being on tariffs, the Dollar dropped quite a bit. This caused the PMO to top beneath the signal line below the zero line. We thought the decline might be over, but now we are reevaluating on the PMO top.
Stochastics are still technically rising. It wouldn't surprise us to see more sideways movement here as the market decides what to do with tariffs.
GOLD
IT Trend Model: BUY as of 1/10/2025
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: With the drop in the Dollar, Gold had a good opportunity to reverse higher. A market decline could get investors more interested in Gold as it is often considered a safe haven in market turbulence. This does have the look of a bull flag.
We are still trying to determine where the Dollar will go. The inverse correlation is holding true with the Dollar so we want a weak Dollar to continue. It's only one day of rally, and indicators are still positioned bearishly for now. Support at the 50-day EMA seems more sturdy than the current level.
GOLD MINERS (GDX) Daily Chart: Despite a rousing rally in Gold, Gold Miners were mostly unchanged. They are dealing with the winds of the market which are pointed downward in the short term. Participation is weak and the PMO continues lower. We don't think the decline is over.
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 in a declining trend and we don't see anything on the chart that would suggest this trend will be broken. The RSI is negative, the PMO is falling below the zero line and Stochastics are trying to top in negative territory. Expect more downside.
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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