ADVANCE-DECLINE LINES REGROUP AND NEW LOWS CONTRACT

 

KEY LEVELS

S&P 500 (SPX/2503.87) – Support [level(s) where buying interest exists]: 2480, 2460 and 2446. Resistance [level(s) where selling pressure exists]: New highs make it difficult to identify resistance levels because there are no "disappointed holders." Thus, 2504 is considered "overbought" as measured by an upper Bollinger Band. 2535 is a target price based on a previous base breakout. 

Russell 2000 (RUT/1441.08) – Tactical support: 1426, 1394 and 1349. Resistance: 1452.

10-Year U.S. Treasury Yield Index [TNX/22.29 (2.22%)] – Support: 21 (2.10%) and 20.34 (2.03%). Resistance: 22.50 (2.25%), 23.37 (2.33%) and 24 (2.40%).

OBSERVATIONS

Advance-Decline Lines (domestic and international): The NYSE Common-Stock Only Advance-Decline Line overcame its recent, one-time-only non-confirmation (there wasn't a series of non-confirmations; it was a single event), and is now in new high territory. The S&P Small Cap Advance-Decline Line has moved into new high territory ahead of the cash index, usually a good sign—charts below. The Global Advance-Decline Line continues to support higher international markets. Regarding the various Advance-Decline Lines I like to follow, the following statement from Martin Pring is applicable here:

"… are in a rising trend, having registered new bull market highs... That does not mean that the market is guaranteed to rise from here. In technical analysis there are no guarantees. However, such strong joint action certainly increases the probability that the market will work its way higher."

New 52-Week Lows(in terms of identifying exact equity market tops and bottoms, new Low and new High indicators are poor timing tools. They aid in discerning the strength or weakness of the overall equity market backdrop): In past reports, we discussed the importance of following 52-week lows. Currently, a contraction in 52-week lows across all capitalization sizes (Large, Mid and Small) is a subtle sign that the odds favor that pullbacks will be more consolidative (lateral price movement) versus corrective (serious price decline) in nature. However, please don't use this internal market indicator as a reason not to identify and manage specific individual downside risk parameters.

Sentiment (secondary indicator, better used in conjunction with other internal market indicators): There are dozens of ways to measure sentiment. I prefer sentiment indicators that reflect what investors are doing, not what they are saying—in other words, actions speak louder than words. The National Association of Active Investment Managers (NAAIM) is an indicator that reflects whether active investment managers are putting money into, or pulling money out of, the equity market. As seen in the chart below, active money managers have been paring back equity exposure. With "sentiment" being viewed as a contrarian indicator, this would be supportive of equities and consistent with any setbacks leading more towards a lateral move versus a serious price decline.    

S&P 500: The non-trading price trend remains supportive of equities. A positive non-trading price trend does not exclude the possibility of a short-term pullback—the calendar is a headwind into mid-October. However, the technical evidence currently suggests pullbacks are likely to be contained.

NYSE Common Stock Only A/D Line. Break down and non-confirmation was over come followed by a new high! S&P Small Cap A/D Line. A/D line is leading the cash index into new high territory. 
2017.09.19-sp500-large-cap-index-sentiment.png
S&P 500 - 9 month chart including 200-DMA. Support levels are highlighed by the "green" lines. 

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 9.18.2017. Chart sources: Stockcharts.com.

Print Article: Day Hagan Tech Talk September 19, 2017 (PDF)

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