We've begun talking more about the Price Momentum Oscillator (PMO) as it relates to finding "pure strength" and "pure weakness". It's all about the zero line and the PMO's behavior above or below.
We review the Magnificent 7 charts frequently and we noticed that both Apple (AAPL) and Google (GOOGL) are displaying "pure weakness" as far as the PMO is concerned.
"Pure weakness" is defined by the PMO moving lower or moving sideways below the zero line. The distance the PMO is away from the zero line determines the veracity of the condition.
We can see with AAPL, there was a period of "pure strength" back in November. The PMO had moved above the signal line and was rising strongly. When it topped and began to fall above the zero line, it was a sign of diminishing strength. Pure weakness set in when the PMO dropped beneath the zero line and it is currently in effect. Had we followed the signal, it would've saved quite a bit of downside.
The rest of the chart looks pretty terrible as well with a negative RSI and Stochastics below 20. Additionally relative strength is failing across the board.
We see a similar setup on GOOGL, but this time the signal is arriving NOW as the PMO dropped beneath the zero line. While this doesn't mean a precipitous decline is ahead, it does tell us to tighten up stops at the very least.
There are signs that there might be further decline ahead for GOOGL. The RSI is negative and Stochastics are below 20. Additionally, relative strength is failing across the board.
Conclusion: The PMO can be used to determine the strength or weakness in a particular move based on its location and direction around the zero line. Based on the PMO, both Apple and Google are displaying pure weakness. If you like this style of analysis, we welcome you to come try DecisionPoint Diamonds reports where I bring you 10 stock/ETF picks per week with a discussion on the PMO and other factors like the ones listed above. Contact us at support@decisionpoint.com to get a discount.
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:
(Editor's Note: Monthly charts will be included in tomorrow's DPA with the weekly charts.)
Today saw a doji candlestick which tells us today was about indecision. We did see a higher high and a higher low but we aren't looking at this as the beginning of a strong rally. Bulls nor bears won the day. We have more evidence.
The rising wedge suggests we will see a breakdown of the rising trendline. The PMO did give us a Crossover BUY Signal today, but it is very twitchy. What we can say is that the PMO is flat well above the zero line and that indicates pure strength right now. Stochastics turned up and are bullishly above 80.
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S&P 500 New 52-Week Highs/Lows: New Highs expanded slightly. The big problem is the overbought 10-DMA of the High-Low Differential. It is at levels not seen in well over a year.
Climax* Analysis: Only one of the four relevant indicators had a climax reading, but SPX Total Volume was 135% of the one-year daily average volume. We were puzzled by this and browsed through the charts of the Dow 30 stocks. Quite a few had volume spikes today, and it was not limited to a specific sector, but the stand out volume was AAPL with 350% of the one-year daily average volume. AAPL just shut down their EV program, and of course, there are their ongoing issues with China. At any rate, we do not think today's SPX Total Volume spike can be attributed to upside initiation. We think it more likely is evidence of a blowoff.
*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 NEUTRAL.
Swenlin Trading Oscillators (STOs) were mixed today with the STO-V rising while the STO-B fell. This is likely attributed to today's strong volume reading. Participation is robust with nearly 3/4ths of the index holding above 20-day EMAs. We saw a slight expansion in rising PMOs, but nothing spectacular. Negative divergences are still a problem.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The continued expansion of rising PMOs has offered %PMO Xover BUY Signals the opportunity to rise, but we are getting close to the threshold again given only 61% hold rising PMOs and we have 58% with buy signals. Both the ITBM and ITVM continued to rise, but the negative divergences are still quite steep. Wouldn't you think that we would have more buy signals given how much further the market has moved higher?
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 BULLISH in the short term.
The market bias is BEARISH in the intermediate term.
The market bias is BULLISH in the long term.
All of the relevant indicators are reading above 50% which is above our bullish threshold so the ST Bias is listed as BULLISH. The SCI is now very close to its signal line. It could push past it given we have more stocks above their 20/50-day EMAs than those with Silver Crosses. We'll monitor this closely as a move above the signal line would move the IT Bias to BULLISH. The GCI looks toppy, but remains above its signal line so the LT 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: The CPE report didn't shake things up as much as we would've expected. It could be read as positive and negative depending on your perspective and that likely led to the indecision today as price closed nearly on the opening price. We think that Total Volume is offering us a clue as to where the market may be headed tomorrow and that would be down. However, we did see the STO-V turn back up and participation levels are still robust enough to hold things together. With IT indicators on the rise, we don't expect a perilous decline, but we should be cautious. Some of the Mag7 aren't looking so magnificent right now and this will apply downside pressure. Keep your stops in play and let the market take you out, this rally has been relentless and we don't want to miss out.
Erin is 60% long, 0% short.
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BITCOIN
Bitcoin gave back some of its gains today but still looks incredibly bullish right now. More downside would offer a possible entry for latecomers. Remember Bitcoin is speculative by nature so go in eyes wide open if you want to trade any of the new Bitcoin ETFs.
BITCOIN ETFs
INTEREST RATES
Yields are beginning to look toppy in the long term. While we see higher rates in the future, it may be time for a short cooling off period.
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 like many of the long-term yields is starting to look toppy. Currently it is holding above support, but the topping PMO suggests diminishing strength. Stochastics look particularly bearish. We may see some pullback here possibly to the 200-day EMA.
BONDS (TLT)
IT Trend Model: SELL as of 2/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: TLT is beginning to look more bullish. The 20-year yield is beginning to top and that will afford TLT the opportunity to rally further. We don't expect an extended rally as the PMO is only signaling diminishing weakness not new strength with the nearing Crossover BUY Signal.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar didn't fulfill the bearish filled black candlestick today as it answered with a bullish engulfing candlestick. The PMO tells us there is diminishing strength, but not necessarily weakness yet as price consolidates sideways. Stochastics did turn back up and the RSI is positive, but the PMO bothers us still so we would look for more sideways action.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold rallied even as the Dollar rose which is very bullish. We also saw what could be a breakaway gap on GLD. We wish that today's candlestick weren't a bearish filled black, but we like how the Gold chart is maturing. The PMO is now above the zero line so new strength is visible. Stochastics are above 80 now.
Discounts remain on the high end of the scale. This tells us that investors are still very bearish on Gold. This prolonged condition could see an upside price reversal based on the prior times we've had discounts at this level.
GOLD MINERS Golden and Silver Cross Indexes: A double bottom could be setting up on GDX, but it is very early. The PMO is well below the zero line so its rise signals diminishing weakness not new strength. We do like that the Silver Cross Index is about to move above its signal line, but we do need to see better participation of stocks above their 20/50-day EMAs. Today's OHLC bar translates to a bearish shooting star so be careful here, it is very early.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Crude Oil tested support successfully today and could be lining up for another leg higher. The PMO is rising above the zero line. Stochastics did move below 80 today so more decline isn't out of the question, but overall we do like this cup-shaped basing pattern.
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.
Helpful DecisionPoint Links:
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DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
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