The release of economic reports that suggest inflation is not going away yet set the market on its head. However, we note that price was already flattening out. Today's open was lower and things just got worse from there with a deep decline in the final ten minutes of trading. The Fed will not likely have good news regarding rate cuts and that will also weigh heavy, although much of that could already be baked in.
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: The good news is that the very short-term rising trend is intact. The bad news is the topping PMO below the zero line and price reentering the prior declining trend.
The VIX and Stochastics are relatively positive so there may be some internal strength left in the market.
Here is the latest recording from Monday, April 29th:
S&P 500 New 52-Week Highs/Lows: New Highs did pare back slightly. We expect that by day's end those New Highs may've vanished. New Lows are making a comeback. The High-Low Differential is still rising nicely.
Climax* Analysis: There were strong, unanimous climax readings on the four relevant indicators today, which gives us a downside initiation 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 OVERBOUGHT.
With the current rising trend intact in the very short term, we are still listing the short-term market trend as "up", but that could change on the next decline. Swenlin Trading Oscillators (STOs) pulled back a great deal today. Participation which had finally moved above 50% bullish thresholds collapsed.
Intermediate-Term Market Indicators: The intermediate-term market trend is UP and the condition is NEUTRAL.
We did a check and both the ITBM and ITVM have begun to fall. This confirms falling STOs.
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 all three timeframes.
We had just moved the ST Bias to bullish and it is now back to BEARISH given %Stocks > 20/50EMAs dropped beneath our bullish 50% threshold. This has caused the Silver Cross Index to top beneath its signal line. The Golden Cross Index is now falling fast. Both Indexes remain below their signal lines so both the IT Bias and LT Bias are BEARISH.
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: Economic reports sent the market lower today, pushing it back into the prior declining trend. The PMO has topped beneath its signal line and both ST and IT indicators are declining again. Participation was slashed today. Insult to injury is today's downside initiation climax which suggests we will continue to see price slide lower. On a side note, Amazon (AMZN) reported excellent earnings and is currently up +1.77% in after hours trading. This could skew trading tomorrow and encourage buyers. Not enough to hang your hat on, but it could prevent more serious losses. It may not be a good time to expand exposure with weakness coming through on so many of our indicators.
Erin is 30% long, 0% short.
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BITCOIN
Bitcoin is now testing support and it doesn't look very sturdy given the now negative PMO and falling RSI in negative territory. Stochastics also look very negative topping for a second time. We would prepare for a breakdown.
BITCOIN ETFs
INTEREST RATES
Rates moved higher on the day. Resistance is about to be tested at 2023 highs.
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 hit resistance and has been trying to breakout ever since. We think it is a matter of time. The PMO has turned back up. Stochastics don't inspire confidence, but the RSI is positive.
BONDS (TLT)
IT Trend Model: SELL as of 3/20/2024
LT Trend Model: SELL as of 1/19/2022
TLT Daily Chart: It appears that the short-term double bottom will be busted with a drop below both bottoms. It hasn't happened yet and based on the flat PMO and rising Stochastics, it may not. At this point we would look for more sideways movement above support.
DOLLAR (UUP)
IT Trend Model: BUY as of 1/23/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: We've been watching the large island formation on the Dollar in preparation for a possible gap down move. Today's rally has turned the PMO back up above its signal line well above the zero line so we have a bullish picture. It looks like the Dollar may be ready to push out of this compression area.
GOLD
IT Trend Model: BUY as of 10/23/2023
LT Trend Model: BUY as of 10/20/2023
GLD Daily Chart: Gold dropped on the rally by the Dollar. Notice that relative strength has been fading against the Dollar and with the Dollar looking more bullish, we should prepare for more downside on Gold.
The RSI has moved into negative territory and Stochastics have dropped below 20. This has the earmarks of a bearish head and shoulders pattern.
GOLD MINERS (GDX) Golden and Silver Cross Indexes: With Gold being hit hard, Gold Miners felt the pain with a huge decline. This really shrunk the robust participation readings we had and suggests to us that the decline may only be just beginning. The PMO has topped beneath the signal line and Stochastics have topped. Support is arriving soon, but we don't have high hopes.
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 is sliding lower. It broke its rising trend. It is currently perched on support at the prior low and the 50-day EMA. The indicators are getting negative, particularly Stochastics so we have to assume that this support level won't hold. This looks very double top like.
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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