BETWEEN 2 EXTREMES: 50-DMA & 200-DMA

 

Following the recent move up into resistance and overbought conditions (chart below), as discussed in our most recent Tech Talk report, last week’s consolidation was “part and parcel” of the move up off the late December 2018 low. Consistent with this, the S&P 500 (SPX/2709.80) appears confined between a flat 200-DMA and downtrend line (both resistance levels) and rising 50-DMA (one of a few support levels)—chart below. As Bob Dickey expressed a while back, “It is normal for the markets to take a breather or consolidation period after making some sharper moves...” Within this context and in terms of “leadership” as defined by favorable/improving relative strength trends versus the SPX, Real Estate and Industrials stand out, while select areas of Technology and Staples are improving. Also, Small Caps are slowly exhibiting an improving relative trend versus the SPX.

Percent of NYSE stocks above 50-DMA readings over 85% doesn't always lead to serious pullbacks, but over the last 10 years it has usually been followed by at least near-term sideways action. There is no reason to think this time is any different.

NYSE Percent of Stocks Above 50-day Moving Average (EOD) Index. S&P 500: 10+ Year Chart.

How the SPX handles these initial tactical levels of resistance and support will be an important short-term guidepost. In the meantime, please stay focused, patient, and unemotional as best you can, and please manage risk.

S&P 500 Large Cap Index. Tactical Support (in green): 2612 to 2600ish. Russell 2000 Index Chart.

Last-minute Charts of Interest: U.S. equity markets finished basically unchanged in the first week of February. This may reflect concerns over slowing global economies, as possibly depicted by declining global yields (charts below) and weakening global currencies. The U.S. Dollar proxy (UUP/$25.82) will record a bullish multi-month breakout on a close above $25.84—chart not shown.  

UST10Y: 10-Year US Treasury Yield Index.
10-Year Japan Treasury Yield.

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UPCOMING EVENTS

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

—Written 02.11.2019. Chart sources: StockCharts.

PDF Copy of Article: Day Hagan Tech Talk February 12, 2019 (PDF)

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