Day Hagan Tech Talk June 28, 2016

DAY HAGAN TECH TALK

DAY HAGAN TECH TALK: JUNE 28, 2016

SUMMARY

Based on the percentage of stocks above 50-day and 20-day moving averages, domestic equity indices are close to but not yet at “oversold” levels.

WRITTEN BY

Art Huprich, CMT

POSTED

June 28, 2016

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The domestic equity markets responded much quicker, in terms of downside price action, to the “Brexit” outcome than I had expected. At the same time, flows continue to make their way into certain non-equity correlated assets, the overall trend of interest rates remains down, though volatile, as defined by the 10-Year Treasury Yield Index (TNX), and “investment dollars” have for the most part continued to look for a home in the more defensive and higher yielding sectors of the equity market.   

Currently, based on the percentage of stocks above 50-day and 20-day moving averages, domestic equity indices are close to but not yet at “oversold” levels, which in the past have generated upside probing or at least some stability and bottom-building characteristics. Consistent with this, an initial band of selling pressure (resistance) for the S&P 500 looks to exist between 2026 and 2040, followed by 2050/2060.

Percentage of S&P 500 Stocks Above 20-DMA chart

SUMMARY

Besides oversold readings, here are some signs to look for that may indicate a market low is in place and a bottoming period has commenced:

  1. The market ignores bad news, especially given the political environment both domestically and in Europe.
  2. Sentiment gets deep into “Extreme Pessimism” levels.
  3. Following the recent 90 percent downside days (declining volume on the NYSE is 90 percent of total declining and advancing volume), a 90 percent upside day occurs (advancing volume on the NYSE is 90 percent of total advancing and declining volume) or consecutive 80 percent upside days occur.

Please let us know how Day Hagan can best serve you.

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

— Written 06.28.2016

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