Day Hagan Tech Talk: Authenticity
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Summary
The S&P 500 closed over 6,300, yet New Highs contracted and A/D Lines are diverging—a condition, not a sell signal. Index-wise, a similar splintering exists. Until there is some resolve, define risk tolerance and implement an investment strategy with risk management parameters.
The Grind (Flat to Higher) Continues
Wall Street participants often face the challenge of separating fact from fiction. In the pursuit of authenticity, consider these observations:
The Day Hagan Catastrophic Stop model indicates that investors should maintain their benchmark equity exposure. Intermediate- and longer-term measures remain constructive. As Don Hagan recently pointed out, “The key is whether earnings can continue to grow, and forecasts indicate continued positive growth. Despite a rise in soft data concerns, such as consumer sentiment, hard economic data continues to support our outlook for moderate expansion. Should our model shift toward a higher risk of contraction, we’ll adjust accordingly.”
Advance-Decline Line divergence. The first broader-based NYSE non-confirmation, as shown in Figure 1, isn’t bearish; it's a conditional warning. Multiple non-confirmations are bearish, e.g., late 2024 to early 2025.
S&P 500 and NASDAQ have recorded new all-time highs. The DJIA, Mid-Cap, and Small-Cap proxies have not—Figure 2. While I believe the odds favor these other indices confirming, until they do, divergences at the index level reveal a crack in an otherwise supportive backdrop.
Note: According to one source, large speculators remain aggressively short the Russell 2000. Potential short covering could fuel a massive rally in due time.
Large-Cap growth-related equity indices reach new highs, yet the number of New 52-week Highs is a long way from surpassing their early July peak reading. While this is not a good timing indicator, it reflects waning upside momentum/stealth, or selective distribution in individual stocks. Another conditional warning to monitor.
While I would prefer a short-term consolidation or pullback to reset sentiment and ideally create an oversold condition, we at Day Hagan strive to align our investment-making process with our unemotional models and indicators—authenticity, which is what our clients deserve. As stated above, we remain fully invested relative to our equity benchmark, as dictated by the Day Hagan Catastrophic Stop-Loss model. Please reach out for details or refer to Don Hagan’s insights from yesterday, 7/22/25.
Trend-wise, Large-Cap Advance-Decline Lines (A/D Line) are fine. The S&P 500 A/D Line ever so slightly confirmed. However, I prefer to see the broader-based NYSE A/D Lines confirm. If you look hard, you’ll see a small non-confirmation—new price highs by equity market indices that the A/D Line does not confirm. One non-confirmation isn’t overly alarming, but a string of them would concern us.
Figure 1: Broader Based NYSE Advance-Decline Lines. | The broader-based Advance-Decline lines haven’t made much progress since their July 10th peak.
We pointed out minor support in the vicinity of 6200 last week. Following a successful test of that level last week, 6200+/- is becoming more telling short-term support—Figure 2.
Figure 2: Domestic Equity Market Indices. | There has been some stealth rotation underneath, but not enough to get the cash indices to break support. Please note the spike low from five days ago (support) in the thumbnail charts on the far right. Green lines depict support; red lines depict resistance.
Emerging Base Breakout
Interestingly, after the initial bullish uproar about Gold at the end of 2024 and the beginning of 2025, I have seen minimal discussion about it over the past four to six weeks. Maybe this is because commodity types have been focusing elsewhere. Nevertheless, we still like Gold's bullish chart configuration, and seasonal factors tend to favor Gold during July—authenticity. Please reach out for a seasonal chart.
Figure 3: SPDR Gold Shares (GLD/$316.10) with a rising 50-day MA and improving momentum. | With well-defined resistance and support levels, $317 and $300 respectively, the next significant directional move will be dictated by which level is decisively broken. I think the odds favor a breakout to the upside, which will generate a price target of $334+, for starters.
The Day Hagan Smart Sector Strategies incorporate built-in risk management parameters relating to sector allocation and equity-versus-cash allocation. Please let me know if you would like to schedule a call to discuss the process and discipline underpinning our Smart Sector with Catastrophic Stop, Smart Sector International, and Smart Sector Fixed Income strategies. Disclosures and Fact Sheets can be found here: https://dhfunds.com/literature.
Day Hagan Asset Management appreciates being part of your business, either through our research efforts or investment strategies. Please let us know how we can further support you.
Art Huprich, CMT®
Chief Market Technician
Day Hagan Asset Management
—Written 7.21-22.25. Chart source: Stockcharts.com unless otherwise noted.
Disclosure
The data and analysis contained herein are provided “as is” and without warranty of any kind, either express 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. 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.
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