The market began strong this morning with major indexes up around +2%, but later in the morning strength began to fade steadily into losses by the end of the day. That may be all we're going to get out of yesterday's upside initiation climax.
SIGNAL CHANGES
Today the Consumer Discretionary ETF (XLY) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. Price has violated the rising trend line, the daily PMO is below the zero line and falling, and the Silver Cross Index has dropped below the 50% level, all of which is bearish.
On the weekly chart we can see that price is testing the bottom of a bearish rising wedge. The weekly PMO is in decline and on a Crossover SELL Signal.
Also today the Retail ETF (XRT) 20-day EMA crossed down through the 50-day EMA (Dark Cross) above the 200-day EMA, generating an IT Trend Model NEUTRAL Signal. XRT remains in a narrow trading range, and this is not a strong looking signal, but the bear market is likely to drag XRT down especially given this is a subset of the struggling Consumer Discretionary sector.
The weekly PMO is below the signal line and falling.
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.
Watch the latest episode of DecisionPoint on our YouTube channel here!
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 bearish engulfing candlestick as the market rally dwindled to a loss during the day. The PMO is falling below the zero line and the OBV is confirming this decline.
Stochastics are below 20 and the VIX is below its moving average suggesting internal weakness. We still see that mega-caps are showing weakness based on the relative strength line to equally-weighted RSP. It isn't likely we will see a reversal until these stocks start to wake up again.
Here is the latest recording from 8/5:
S&P 500 New 52-Week Highs/Lows: We did see a few more New Highs, but that was tempered with more New Lows. The High-Low Differential is still in decline.
Climax* Analysis: There was only one climax reading today, not enough to be a climax day.
*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 DOWN and the condition is OVERSOLD.
Swenlin Trading Oscillators (STOs) are in oversold territory. Both could accommodate more downside with lower readings. Participation did shrink as we would expect. We have so few rising PMOs right now. It will be hard to get a rally started with so few.
Intermediate-Term Market Indicators: The intermediate-term market trend is DOWN and the condition is NEUTRAL.
The ITBM and ITVM are not oversold yet and can definitely absorb more downside movement. We continue to lose PMO BUY Signals. The rising trend on %PMO Xover BUY Signals has been broken.
PARTICIPATION CHART (S&P 500): The following chart objectively shows the depth and trend of participation for the SPX 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 now BEARISH in the intermediate term.
The market bias is BULLISH in the long term.
The Silver Cross Index continues to slide as we lose more and more stocks above their 20/50-day EMAs. Reading could move much lower based on those low percentages in participation. The Golden Cross Index has flattened, but will likely resume the decline in earnest given we are losing participation of stocks above the 200-day EMA. The Silver Cross Index is below its signal line so the IT Bias is BEARISH. The Golden Cross Index is above its signal line so the LT Bias remains 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.
****************************************************************************************************
CONCLUSION: Bearish biases are back when you look at the Bias Table above. Notice that three of the BULLISH Biases belong to defensive sectors (XLP, XLU and XLV). Defensive sectors are generally the last men standing before a market failure. Our bullish upside initiation climax did not result in a higher close today. This was telling. When bullish signals start to fail, we are generally in a bear market situation. We do note STOs are oversold, but they are still declining along with the ITBM and ITVM. At this point, we should play defense.
Erin is 20% long, 0% short.
****************************************************************************************************
CALENDAR
Have you subscribed the DecisionPoint Diamonds yet? DP does the work for you by providing handpicked stocks/ETFs from exclusive DP scans! Add it with a discount! Contact support@decisionpoint.com for more information!
BITCOIN
Bitcoin was down on the day but formed a higher low and a higher high. We suspect it will begin making its way higher given Stochastics are rising. The PMO is decelerating somewhat. Entry now is a bit dangerous until the PMO turns back up.
BITCOIN ETFs
INTEREST RATES
Yields were mixed today, but ultimately they are beginning to bounce off support. We are looking for them to begin rising in earnest off this level.
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 has situated itself back within the prior declining trend channel. Indicators are beginning to ripen suggesting the rally isn't over yet. The PMO is turning up and Stochastics are rising again.
BONDS (TLT)
IT Trend Model: BUY as of 6/5/2024
LT Trend Model: BUY as of 7/17/2024
TLT Daily Chart: TLT is reversing as interest rates are making their way back up. Support is arriving soon and that could be a level where we'll see some consolidation. The PMO does look ready to top and Stochastics are declining, so ultimately we should look for a cooling in Bond funds.
DOLLAR (UUP)
IT Trend Model: NEUTRAL as of 8/5/2024
LT Trend Model: BUY as of 5/25/2023
UUP Daily Chart: The Dollar is slowly making its way higher, but it has reached overhead resistance. Stochastics have ticked up, but the PMO is still declining. This looks like a good place for the 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: The Dollar is looking more bullish and that is going to put downside pressure on Gold. We already have a bearish double top and a PMO Crossover SELL Signal. Stochastics are falling. All of this suggests Gold will continue to slide. The confirmation line is there for support, but we expect it to be broken.
Interestingly, discounts have been pulling back suggesting investors are looking more favorably toward Gold. It hasn't resulted in upside yet. It may take much more optimism before we get a rally. If discounts really disappear, that would be bearish as investors will have gotten too bullish.
GOLD MINERS (GDX): Gold Miners slid lower today with the decline in Gold. We are bearish on Gold and consequently we are bearish on Gold Miners. Participation has fallen a great deal leaving no stocks to raise the boats. The Silver Cross Index is losing ground quickly as more stocks lose their Silver Cross BUY Signals.
CRUDE OIL (USO)
IT Trend Model: BUY as of 6/21/2024
LT Trend Model: BUY as of 2/27/2024
USO Daily Chart: Crude Oil rallied strongly today, but it hasn't pushed price out of the declining trend. This is encouraging, but we aren't going to get bullish until Stochastics move above 20.
We did note yesterday that this could be a good reversal point. We will be monitoring this current rally closely as the bearish double top (April top, July top) is still going to be in play until we see a breakout above that level.
Good Luck & Good Trading!
Erin Swenlin and Carl Swenlin
Technical Analysis is a windsock, not a crystal ball. --Carl Swenlin
(c) Copyright 2024 DecisionPoint.com
Disclaimer:This blog is for educational purposes only and should not be construed as financial advice. The ideas andstrategies should never be used without first assessing your own personal and financial situation, or without consulting afinancial professional.Any opinions expressed herein are solelythose of the author, and do not in any way represent the views or opinions of any other person or entity.
DecisionPoint is not a registered investment advisor. Investment and trading decisions are solely your responsibility. DecisionPoint newsletters, blogs or website materials should NOT be interpreted as a recommendation or solicitation to buy or sell any security or to take any specific action.
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:
DecisionPoint Alert Chart List
DecisionPoint Golden Cross/Silver Cross Index Chart List
DecisionPoint Sector Chart List
Price Momentum Oscillator (PMO)
