Editor's Note: We apologize that yesterday's DP ALERT is being published late.
Nvidia (NVDA) will announce earnings tomorrow after the close, and its reaction will probably affect the market as a whole. Its price action today, a break to the downside, implies that there will be more downside to follow this week. It also suggests that shareholders are concerned and are locking in their profits. This may be a case of "buy the rumor, sell the news."
Beside the potential for earnings to torpedo the stock, we should also be concerned that the stock has gone up very far and very fast, and we can see a parabolic arc on the weekly chart. Technically speaking parabolic advances reflect an overheated market in a stock, and a frequent result is a parabolic collapse, which appears to have started today. To be clear, NVDA is not an empty vessel, but it is possible that a substantial correction is coming.
The most obvious support is at 500 (about a 32% decline from the all-time high), although a pullback doesn't need to be that severe.
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Today the TLT (iShares 20+ Year T-Bond ETF) 20-day EMA crossed down through the 50-day EMA (Dark Cross), generating an IT Trend Model SELL Signal. We will discuss this more in the Bonds section below.
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
CLICK HERE for Carl's annotated Market Index, Sector, and Industry Group charts.
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 saw a PMO Crossover SELL Signal. The last two times this happened it didn't result in more than consolidation, if that. We've circled prior "fake outs" and now we have to wonder if this last time will actually be the signal of possible top. We do have what appears to be a small double top forming.
The VIX penetrated the lower Bollinger Band today and that generally will lead to some upside. However, we think that investors are getting nervous for the right reasons. NVDA's poor chart reflects this. Right now the rising trend is holding up. Stochastics tipped over but remain above 80.
Here is the latest recording from 2/12, there was no recording on 2/19:
S&P 500 New 52-Week Highs/Lows: New Highs pared back as we would expect. The 10-DMA of the High-Low Differential is now back to rising, but overall it looks hesitant and it is in a declining trend.
Climax* Analysis: There were no climax readings today.
*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.
Friday saw the Swenlin Trading Oscillators (STOs) turning lower. Today they continued the decline. We saw %Stocks > 20EMA shaved, but it does remain above our bullish 50% threshold. We now have less than 50% of stocks with rising momentum. We need more. Negative divergences continue to throw shade on this chart.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
The ITBM and ITVM both moved lower after reversing lower on Friday. Negative divergences also remain a problem on this chart as well. We aren't likely to see much more expansion on %PMO Xover BUY Signals given we only have 47% showing 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 BULLISH in the short term.
The market bias is BEARISH in the intermediate term.
The market bias is BULLISH in the long term.
Negative divergences are the primary problem with our bias chart. We do still have readings above our bullish 50% threshold so that is why the ST Bias remains BULLISH. The Silver Cross Index turned back up today, but given we have lower percentages on %Stocks > 20/50EMAs it isn't a condition that will persist. It is below its signal line so the IT Bias is BEARISH. The Golden Cross Index is holding steady 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: Consumer Staples (XLP), a very defensive area of the market, was the only sector higher on the day. The spike in the VIX also speaks to investors' worry about the future of the SPX. This could just be another hiccup, but seeing Mag7 stocks weakening, this is setting up for a decent decline. The negative divergences may be coming home to roost. STOs/ITBM/ITVM are all falling and today saw a new PMO Crossover SELL Signal on the SPY. It's time to consider tightening stops.
Erin is 60% long, 0% short.
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BITCOIN
Bitcoin is beginning to consolidate its rally and this is forming a bull flag. However, the flag is horizontal not trending downward and that could prevent the breakout here. The PMO is slowing, but still looks very healthy alongside Stochastics which have taken up residence above 80. The RSI remains the problem and this could finally be signaling a possible pullback ahead.
BITCOIN ETFs
INTEREST RATES
Yields paused their advance today, but remain in robust rising trends so we would look for them to slowly continue higher.
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 saw a Silver Cross of the 20/50-day EMAs which boosts an already bullish chart. The RSI is positive and not at all overbought. The PMO looks very strong and Stochastics are turning back up while above 80. We would look for the 10-year yield to move higher from here.
BONDS (TLT)
IT Trend Model: SELL as of 2/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: As noted in the opening, today we saw a Dark Cross on Bonds. We were already bearish on Bonds, this just adds to our conviction. Support is nearby at 90.00, but the PMO is now declining below the zero line and Stochastics are firmly below 20, so we don't think that level will hold.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The RSI is still holding in positive territory and today's candlestick was a bullish hollow red candle. However, the PMO has topped on the Dollar and Stochastics have dropped below 80. The rising trend is still intact, but it is highly vulnerable based on those two indicators.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold had a good day, but did form a bearish filled black candlestick that portends a decline tomorrow. Still, this was a nice rally that helped Gold avoid a Dark Cross of the 20/50-day EMAs. The PMO is rising and the RSI just pushed back into positive territory. Stochastics are also rising. The Dollar is very vulnerable so the Gold trade may turn out quite well.
Sentiment is highly bearish as it is reaching oversold levels. This could work in Gold's favor right now as extremely bearish sentiment is actually bullish for Gold. The inverse correlation is deepening again so the Dollar does need to break down to make the road clear for Gold to move higher.
GOLD MINERS Golden and Silver Cross Indexes: Gold Miners took advantage of the rally in Gold and with Gold looking more bullish, this could be an interesting area moving forward. It will have to fight the winds of the market if it continues to weaken. We have a feeling the direction of Gold will make or break GDX. The declining trend is intact so it is hard to get really bullish here. Participation isn't strong yet either.
CRUDE OIL (USO)
IT Trend Model: BUY as of 2/12/2024
LT Trend Model: SELL as of 12/18/2023
USO Daily Chart: Not surprisingly, Crude is having trouble breaking out. The chart has not gone south at all, so we are still expecting a breakout. The RSI is positive and the PMO is rising on a Crossover BUY Signal above the zero line. We even have Stochastics rising above 80.
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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