Day Hagan Research Update




Cracks in the ratio of small caps to large caps, and the Small Cap Advance-Decline Line, should be respected.


Art Huprich, CMT


March 7, 2017


Bottom Line: I interpret the observations below as meaning the current equity backdrop is being much more specific about what should be culled from portfolios (poor-acting small cap positions), as well as the necessity to identify, and/or tighten, trailing stop loss points.

Over the past five weeks, while the large cap universe has consistently traded higher, I have consistently discussed my concern relative to the tape action of the small cap universe. As recently as my last Tech Talk report, dated 2/28/17, I stated the following:

The price action of Small Caps relative to Large Caps and the lagging action by the Small Cap Advance-Decline Line continue to make me anxious! Unless the action in the Small Cap universe improves (confirms), this is meaningful because Small Caps usually start underperforming first, as equity markets top, followed by Mid-Caps and ultimately Large Caps…

Regrettably, the price action of both measuring tools (the Small Cap Advance-Decline Line and the ratio of the Russell 2000 [small cap] to the S&P 500 [large cap]) continue to act poorly and both are weakening further. When coupled with the DJIA's inability to penetrate a resistance line in the area between approximately 21,000 and 21,500, as shown below, and a minor non-confirmation by the NYSE Common Stock Only Advance-Decline Line (not shown) when the S&P 500 recorded a new closing high last week (3/1/17), some definite near-term cracks in the Bull's armor have occurred.

Please know that Day Hagan Asset Management appreciates your support and hard work!

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

— Written 03.06.2017. Chart sources: 

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