Today the Fed held rates the same, but Chairman Powell said it was unlikely that there would be a rate cut in March. This did the market no good, but GOOGL and Microsoft declined mightily on their earnings announcements yesterday after the close. GOOGL was especially hard hit, closing down -7.50 today. In fact the Magnificent 5 tech stocks all had a bad day. Tomorrow after the close AAPL, AMZN, and META will be reporting earnings.
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 11/14/2023
LT Trend Model: BUY as of 3/29/2023
SPY Daily Chart: Today was the month end, but we'll hold the monthly charts until Friday. Today the market suffered a significant loss which has baked in all of the negative divergences we already had. The PMO has turned down and one piece of good news, the RSI is no longer overbought.
With troubles arriving for GOOGL and MSFT after earnings, the relative strength line to equal-weight RSP is falling. Mega-cap leadership is failing.
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S&P 500 New 52-Week Highs/Lows: Despite the big decline we did see an expansion on New Highs, but we did see some New Lows logged. For now, the 10-DMA of the High-Low Differential is rising, but it is overbought.
Climax* Analysis: Today there were unanimous climax readings on all the relevant indicators, giving us a downside initiation climax. SPX Total Volume was 1.35 times the one-year daily average, which confirms the climax.
*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 SOMEWHAT OVERBOUGHT.
The Swenlin Trading Oscillators (STOs) are continued to fall today as we would expect. Notice the decimation of participation of stocks above their 20-day EMAs and rising momentum. Less than one quarter of the index hold rising PMOs.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
IT indicators confirmed declining STOs with a decline of their own. These negative divergences is steep and ugly. We also saw %PMO Xover BUY Signals top today.
PARTICIPATION: The following chart objectively shows the depth and trend of participation 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 short-term market bias is BEARISH.
The intermediate-term market bias is BEARISH.
The long-term market bias is BULLISH.
While %Stocks > 50-day EMA is above the 50% bullish threshold, %Stocks > 20-day EMA have dipped below. Combining the negative indicators we showed above we believe the short-term bias should be listed as BEARISH. The Silver Cross Index is declining and is below its signal line so we have a BEARISH IT Bias. The Golden Cross Index has topped but remains above its signal line so we are still listing the LT Bias as BULLISH.
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: The Bias Table above reads bearish in the intermediate term, telling us the complexion of the market has changed. Mega-cap stocks are now losing leadership and at this point there really isn't enough participation from the broad market to hold things together. The indicators are unanimous in their bearishness as they are declining and hold negative divergences. The decline we have been looking for is upon us and given today's downside initiation climax, there is likely to be more downside to follow. Preserving profit is now key. We would tighten up stops or consider lightening the load.
Erin is 50% long, 0% short.
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BITCOIN
Yesterday's comments still apply:
"Bitcoin is making a move out of recent lows and has now overcome both the 20/50-day EMAs. It is still in a consolidation zone, but given the nearing PMO Crossover BUY Signal, we would look for a move toward the top of the range near 46,000."
BITCOIN ETFs
INTEREST RATES
Rates are showing near-term weakness and appear ready to move back down towards support.
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
We were looking for a breakdown here and we got one. More than likely we will see $TNX test 3.8% before this is all done. The PMO top beneath the zero line is especially bearish and Stochastics are in free fall.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: The drop in yields is pushing Bond funds back up and based on the yield charts, we would say that this condition will persist. The PMO looks especially bullish as it rises toward a Crossover BUY Signal above the zero line. The RSI is positive and Stochastics are on the rise. We like Bonds right now.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: Today UUP formed a bullish engulfing candlestick that implies we will see the Dollar rise again tomorrow. The indicators remain healthy, but UUP has been unable to overcome overhead resistance. We would look for more consolidation below resistance for now.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold didn't have a great day and is struggling mightily to rally. However, we suspect Gold is ready to make a move upward. Today Erin's ETF scans produced seven different Gold funds so something is going on under the surface. The PMO has yet to give us a Crossover BUY Signal, but Stochastics are rising and the RSI is positive.
With the Dollar not looking bearish, it is a good thing that the reverse correlation with Gold is easing. This will allow Gold to move higher even if the Dollar does.
GOLD MINERS Golden and Silver Cross Indexes: The rising trend is holding up and we do think Gold will make a move soon to help this industry group along. However, if the market is going to struggle, GDX will too. Participation is there, but is very thin. We would be careful with this group. They are at a decision point and really could go either way at this time.
CRUDE OIL (USO)
IT Trend Model: BUY as of 1/31/2024
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: Crude backed off today but remained above the 200-day EMA. This decline definitely took the shine off as the PMO is already decelerating. Good news is it saw a Silver Cross of the 20/50-day EMAs giving Crude Oil an IT Trend Model BUY Signal. Stochastics have topped, but remain above 80. We will need to see a rally tomorrow, otherwise the PMO will turn down which will temper our currently bullish expectations.
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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