Day Hagan Research Update

DAY HAGAN TECH TALK

SMALL CAP: LEAD THE BOUNCE
LARGE CAP: MORE CONSOLIDATION THAN CORRECTION

SUMMARY

Domestic and global equity markets continue to support a bullish non-trading backdrop, while small caps are exhibiting a positive near-term change of character.

WRITTEN BY

Art Huprich, CMT

POSTED

April 25, 2017

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KEY LEVELS

  • S&P 500 (SPX/2374.15) – Tactical support [level(s) where buying interest exists]: 2356 (gap support), between 2329 and 2322. Resistance [level(s) where selling pressure exists]: 2378, 2390 [previous price peak and upper Bollinger band (overbought)] and 2401. 
  • Russell 2000 (RUT/1397.97) – Tactical support: Between 1345 and 1335. Resistance: 1415.
  • 10-Year U.S. Treasury Yield Index [TNX/22.73 (2.27%)] – Support: 21.77 (2.17%), 20.67 (2.06%—rising 200-DMA, will marginally change each day) and 20 (2.00%—uptrend line). Resistance: Between 23 and 23.50 (2.30% to 2.35%—previous breakdown levels).   

SUMMARY

From a longer-term, non-tradingperspective, domestic and global equity uptrends remain supportive.

Within the context of a statistically "neutral" short-term condition (Bollinger band analysis) and after holding just above tactical support, stocks caught a bid last week and yesterday. In terms of capitalization size, Small Caps lead the way. Consistent with this and while, admittedly, there are many definitions of a "Breadth Thrust," when defined by a quick move from below 30% to above 70% by the percentage of stocks above the 20-day exponential moving average, Small Caps experienced a "Breadth Thrust" last week. This is bullish for this complex and possibly the overall market, because Small Caps have been underperforming since December 2016.



A global bull market remains intact.



On a more immediate basis, while "Overbought levels" aren't too far away (2390 for SPX), the fact that "New High" readings are accelerating is indicative of further upside probing.



In addition to the bullish "change of character" shown below, the Small Cap 600 A-D Line (not shown) is improving, and is only 20 net advancing issues from a new high.



IN TERMS OF DISCERNING NEAR-TERM RISK   

  • Dow Jones Transportation Average (TRAN/9282.99): Bullish near-term breakout.
  • Semiconductor Index (SOX/1007.80): Held critical near-term support at 960. Please use this level as a tactical guidepost going forward. A topside breakout at 1017-1018 may imply an increasing desire on the part of Wall Street participants to add risk to their portfolios and bid stocks higher.
  • Financial Select Sector SPDR Fund (XLF/$23.68): Needs to stay above resistance at $24 in order to "turn the corner" on a near-term basis.


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 4.24.2017. Chart sources: Stockcharts.com.

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