As part of the free DecisionPoint Trading Room, Erin will pull up a CandleGlance of all the sectors to give us a big picture look at market internals. Today with the topping PMO on Technology (XLK), all sectors are seeing declining momentum. Most of these PMOs are overbought. It seems unlikely that we will see an upside reversal given the failure of internal momentum within the index.
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: We would now say that we have a double top on price that suggests we will see 455.00 tested. The PMO continues lower. While the RSI is still positive, it is headed for negative territory. Further decline will spur that along.
The VIX punctured the lower Bollinger Band on our inverted scale once again. These punctures are generally followed by a day of upside unless bearish forces are particularly strong. Stochastics look terrible in their decline. We still see mega-caps are outperforming the equal-weight RSP. The Magnificent 7 are still holding sway, but a more concerted broad market decline will likely see them fall as well.
This week's episode is not available on YouTube, but you can access it using the recording and download link below. Recordings will be taken down after two weeks:
Recording & Download Link HERE.
Passcode: January#8
S&P 500 New 52-Week Highs/Lows: New Highs did gain slightly but the negative divergence is what we are concentrating on and that has not seen relief. New Lows made an appearance again today. The 10-DMA of the High-Low Differential is decelerating a bit, but overall still looks negative in its decline.
Climax* Analysis: There were unanimous climax readings on the relevant indicators today. We have decided to revise yesterday's call and call it a downside initiation climax. As such, today will be a downside exhaustion climax. That doesn't mean that there won't be continued downside follow through, but we should be alert for a bounce. The VIX seems to be inline with an exhaustion 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 OVERSOLD.
Swenlin Trading Oscillators (STOs) declined again today, pushing the STO-V into oversold territory. Still, the STO-B is not oversold and could stand to more even lower. Rising PMOs continue to diminish.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
We're going to list the ITBM and ITVM as "neutral" although the ITBM is still somewhat overbought. %PMO Xover BUY Signals is now getting oversold, but we know it can move even lower given only 17% hold rising PMOs.
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 market bias is BEARISH in the short term.
The market bias is BEARISH in the intermediate term.
The market bias is BULLISH in the long term.
Given the big decline in %Stocks > 20/50EMAs we are listing the short-term bias as BEARISH. The SCI is below its signal line so we must list the intermediate-term bias as BEARISH. The GCI continues to rise, but is showing signs of distress. It is above its moving average so the long-term bias is 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: Momentum is still a big bearish factor in the equation, but today's downside exhaustion climax and VIX puncture suggest a small bounce is a possibility. However, we wouldn't look on any favorable price action as the beginning of something lasting. Internal momentum has failed and now we are seeing many stocks losing support at key moving averages. Momentum looks very bearish for all of the sectors. Possible bounce for tomorrow, but more decline will likely follow. Should price move down again, we will know that the bearish forces are winning. For the more risk averse, tighten stop levels. Erin suggested two hedges in today's DP Diamonds Report.
Erin is 75% long, 0% short.
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BITCOIN
Indicators were beginning to firm up yesterday, but they've taken a turn for the worse. Support at 40,000 will likely be reached and will be vulnerable to further decline.
BITCOIN ETFs
INTEREST RATES
The rally in yields is back on and we expect a rising rate environment in the near term.
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
Today's breakout confirms our bullish stance on interest rates. We expect the 10-year yield will continue to move higher and indicators are in agreement. The RSI is positive and the PMO is accelerating higher. Stochastics are also very positive.
BONDS (TLT)
IT Trend Model: BUY as of 11/28/2023
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: We see the troubles continuing for Bond funds as interest rates begin to rally higher. Today support at the 50-day EMA was compromised. The RSI is negative and the PMO is in decline. Even Stochastics have topped below 20. Expect lower prices.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 11/27/2023
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar broke out above resistance today, but formed a bearish filled black candlestick. These candlesticks don't always spell decline, but it should keep us alert to a possible decline tomorrow. Indicators are very bullish so ultimately we expect the Dollar's rally to continue.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: GLD lost two levels of support today, the 50-day EMA and October high. Stochastics have topped in negative territory and combined with the negative RSI and declining PMO, we have to expect Gold to decline further.
The correlation between Gold and the Dollar is strong right now so a bullish Dollar as we have now is going to apply more downward pressure.
GOLD MINERS Golden and Silver Cross Indexes: With Gold and the market failing, Gold Miners have been decimated. Participation is extraordinarily low and the GCI is about to cross below its moving average. We already have a bearish bias in the short and intermediate terms. If the GCI moves below its signal line, we would then have a bearish long-term bias. We expect GDX will continue down to 25.00.
CRUDE OIL (USO)
IT Trend Model: NEUTRAL as of 11/7/2023
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: Yesterday's comments still apply:
"Crude Oil continues to chop around sideways and based on the indicators, we don't see that ending in the near future. The PMO is flat and unresponsive, the RSI is below net neutral (50) and yet Stochastics are rising. Until the indicators join forces, we would expect more choppy sideways trading."
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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