A FEW INVESTMENT AND SHORT-TERM TAKEAWAYS
Global: While the U.S. equity markets continue to exhibit the dominant price trend (trend followers remain over-weighted the U.S.), the near-term performance gap between the U.S. and select overseas markets may narrow as the 4Q progresses, especially if the U.S. dollar weakens further. In other words, short-term “reversion to the mean” proponents who will manage risk and accept volatility may want to look at China.
Trend followers who want to look for overseas opportunities may want to look at Japan and Canada.
Domestic: Over the past three months I have preferred Large Cap stocks over Small Caps. Until the relative strength trend between these two asset classes changes or the U.S. dollar starts to strengthen again, I will continue to hold this opinion.
As noted in my Technical Analysis webinar dated 9/18/18, “upside participation within the Small Cap universe is narrowing!” Besides the charts shown during the webinar relative to this observation, the Small Cap A/D Line I monitor is far below its late-August all-time high, while A/D Lines for the Large and Mid-Caps, along with the NYSE Common Stock Only A/D Line, recorded an all-time high last week. Consistent with this, please be vigilant in managing downside risk, especially in the small cap arena. Please refer to chart below.
Tactically: In my Tech Talk report dated 8/28/18, I noted the following: “Given the advent of instant news, it’s easy to get caught up in the day-to-day activity of the market and to integrate short-term ‘noise’ within the primary trend. Consequently, pay attention to the primary trend and realize that short-term market reactions are simply interruptions to the primary trend.” In other words, please incorporate an investment style that emphasizes risk management yet remains objective and unemotional in its approach. Please refer to the chart of the S&P 500 shown below, for a key area of short-term tactical support.
Day Hagan Asset Management appreciates being part of your business, either through our research efforts or investment strategies. Please let us know if we can do any additional work for you.
Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management
—Written 09.24.2018. (Happy 35th anniversary, Elane) Chart sources: Stockcharts.
PDF Copy of Article: Day Hagan Tech Talk October 23, 2018 (PDF)
Disclosure: The data and analysis contained herein are provided "as is" and without warranty of any kind, either expressed or implied. Day Hagan Asset Management (DHAM), any of its affiliates or employees, or any third-party data provider, shall not have any liability for any loss sustained by anyone who has relied on the information contained in any Day Hagan Asset Management literature or marketing materials. All opinions expressed herein are subject to change without notice, and you should always obtain current information and perform due diligence before investing. DHAM accounts that DHAM or its affiliated companies manage, or their respective shareholders, directors, officers and/or employees, may have long or short positions in the securities discussed herein and may purchase or sell such securities without notice. DHAM uses and has historically used various methods to evaluate investments which, at times, produce contradictory recommendations with respect to the same securities. When evaluating the results of prior DHAM recommendations or DHAM performance rankings, one should also consider that DHAM may modify the methods it uses to evaluate investment opportunities from time to time, that model results do not impute or show the compounded adverse effect of transactions costs or management fees or reflect actual investment results, that some model results do not reflect actual historical recommendations, and that investment models are necessarily constructed with the benefit of hindsight. For this and for many other reasons, the performance of DHAM’s past recommendations and model results are not a guarantee of future results. The securities mentioned in this document may not be eligible for sale in some states or countries, nor be suitable for all types of investors; their value and income they produce may fluctuate and/or be adversely affected by exchange rates, interest rates or other factors.
Investment advisory services offered through Day Hagan Asset Management, an SEC registered investment advisory firm. Accounts held at Raymond James and Associates, Inc. (member NYSE, SIPC). None of the entities listed here in this disclosure are affiliated.