Day Hagan Research Update

DAY HAGAN TECH TALK

AMIDST THE MESS IN THE SWAMP…

SUMMARY

In light of the seeming confusion of our newly elected officials, let's turn to the tape for what is really happening on Wall Street.

WRITTEN BY

Art Huprich, CMT

POSTED

April 11, 2017

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KEY LEVELS

  • S&P 500 (SPX/2357.16) – Support [level(s) where buying interest exists]: 2348 (rising 50-DMA), 2322 (short-term tactical level) and between 2300 and 2267. Resistance [level(s) where selling pressure exists]: Between 2378 and 2382 (important short-term tactical range because a move above this range would break the current downward trend of "lower peaks and lower troughs"), 2390 and 2401.  
  • Russell 2000 (RUT/1367.08) – Support: 1349 (very short term), critical range between 1341 and 1335. Tactical Resistance: Between 1390 and 1393, and 1415.
  • 10-Year U.S. Treasury Yield Index [TNX/23.61 (2.36%)] – Support: 22.71 (2.27%—critical level). Resistance: 24.27 (2.42%—very short-term), and between 26 and 26.21 (2.60%-2.62%).  

SUMMARY

From a longer-term, non-trading price perspective, while the market may continue to consolidate and/or pull back, the longer-term price trend remains supportive.

On a near-term basis, the S&P 500 has traded flat to marginally down since March 1. Consequently, I would classify it as "neutral," defined by trading in the mid-range of its respective Bollinger Bands—chart below. Bollinger Bands are volatility bands placed above and below a moving average. Volatility is based on the standard deviation, which changes as volatility increases and decreases. Bollinger Bands aid in discerning overbought and oversold conditions. Consistent with this and as highlighted in last week's After Market Hours webinar, I'll specifically monitor the absolute and relative price action of the small caps, transports, retail, energy and banks. Since these areas started weakening prior to the SPX's March 1 closing high, they'll likely need to stabilize and turn up before the consolidation/correction period is complete—see table below.

ADDITIONAL OBSERVATIONS

  • Breadth (defined by various Advance-Decline Lines [A-D Line]): From a non-trading perspective, the Traditional NYSE Advance-Decline Line is at a new high—bullish. Also, it is encouraging to see selective overseas strength coupled with a primary domestic equity market uptrend. However, I will continue to monitor the negative non-confirmation between the NYSE Common Stock-Only A-D Line and the S&P 500/DJIA from March 1, as well as the continuing poorrelative strength and A-D Line associated with the Small Cap universe—bearish. Please reach out for details.    
  • Momentum: The loss of upside momentum is evident by the percentage of stocks above their 50-DMA (chart below) and the contraction of new 52-week highs since December 2016.
  • S&P Macro Sectors: Aided by international tensions, the Energy sector has held support—chart below.      
  • Sentiment: Another way to view sentiment is by looking at the Volatility Index (14.05/VIX). Currently, the VIX is carving out a near-term pattern of higher troughs—chart below. This may be an indication that stock market volatility is poised to rise. A move above 15 to 20 by the VIX may be indicative of investor fear, and that the correction/consolidation period has run its course.



It is important that these areas stabilize and catch a bid—use as "guideposts" as 2Q progresses.






Have a wonderful start to your week. Please know that Day Hagan Asset Management appreciates your support and hard work!

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

—Written 4.10.2017. Chart sources: Stockcharts.com.

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