Day Hagan Tech Talk: Back to Resistance Again
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Summary
Stocks bounced sharply higher once support was tested and held, further supported by oversold conditions and relatively favorable inflation reports. Internal measuring tools moved sharply in the right direction. Broader participation and follow-through are now needed.
Topsy-Turvy
Over the past four to six weeks, the domestic equity and fixed-income markets have been topsy-turvy, “in utter confusion or disorder.” This is an apt description of Wall Street since late 2024. Considering higher energy prices, favorable corporate earnings thus far, a sharp decline in interest rates, and domestic/global geopolitics, is it any wonder price volatility continues? Psychologically, stock investors would welcome lower interest rates, which would provide a solid underpinning. The CBOE 10-Year U.S. Treasury Yield Index (TNX/45.74) has support between 45.17 to 44.50, and 44. Expect yields to bounce higher from somewhere in these support areas.
Last week’s rally produced two gaps. The initial support areas for the S&P 500 (SPX/6049.24) are 1) between 5978 and 5937 and 2) between 5905 and 5843—Figure 1, thumbnail chart on right. Resistance (red lines): 6050 and 6100+/-. So far, SPX’s uptrend remains intact.
Figure 1: S&P 500. | Stocks bounced sharply higher once support was tested and held. How long it takes to fill the rally’s two gaps—and if it happens—will help in determining Wall Street’s ongoing interest in adding additional risk by buying more stocks.
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Art Huprich, CMT®
Chief Market Technician
Day Hagan Asset Management
—Written 01.20-21.2025. Chart source: Stockcharts.com unless otherwise noted.
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