Day Hagan Tech Talk: Bang, Zoom!
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Summary
I want equity market proxies to break topside and see 1) what selling pressure arises, if any, 2) if internal measuring tools (Advance-Decline figures, New Highs, sector participation, equal versus cap weight, etc.) confirm or diverge (again), and 3) sentiment readings.
To the Moon, Alice
The Honeymooners was an iconic 1950s American television sitcom. One character, New York City bus driver Ralph Kramden, often shouts “to the moon” and “bang, zoom” during disagreements to try to intimidate his wife Alice, but she knows he is full of hot air.
Are the Wall Street bulls—who are looking for the domestic equity market proxies to break out to the top side as false breakouts occur—full of hot air? Or, like how many episodes of The Honeymooners end with Ralph telling Alice, “Baby, you’re the greatest,” do topside breakouts hold, and does a new short-term uptrend begin—“to the moon?” We should know shortly.
Figure 1: Domestic Equity Market Proxies. | Arrows and green lines depict support, and red lines depict resistance. Also, please refer back to the summary above and the “Bottom Line” below.
Bottom Line: The S&P 500 (SPX/6129.58) closed at a new high. Now, to believe that a measured move towards 6400 is possible (6100 [top of the range, rounded] minus 5800 [lower end of the range, rounded] = 300 [depth of base]. 6100 plus 300 = 6400 target), we ideally need more broadening action domestically (overseas markets have outperformed year-to-date), and better relative strength by the S&P Equal Weight Index. As alluded to in the summary above, how long will it take for the Large Cap Advance-Decline Lines (A/D Line) to finally confirm?
Following yesterday’s tape action, the NYSE All Issues A/D Line has confirmed SPX’s new high. However, the NYSE Common Stock Only and SPX A/D Lines have much work to do to confirm SPX’s new high.
Forewarned is Forearmed
From my perspective, inflation expectations may affect interest rate directional moves. Therefore, it is prudent to follow said expectations along with longer-term directional moves by various commodity proxies (Figure 3). Consistent with this, Figure 2 reflects that inflation expectations have been rising, possibly reflecting the implementation and results of President Trump’s policies (tariffs, less immigration, and tax cuts). Directionally, inflation expectations are growing, as they were in late 2021, before the last significant domestic equity market decline.
Figure 2: Commodity Futures and Inflation Expectations. | Inflation expectations are rising.
Since energy prices heavily influence specific commodity proxies, I have attempted to depict a spectrum of commodity representatives.
Figure 3: Commodity Proxies. Log chart | Bullish (supportive) long-term chart configurations.
Figure 4: Silver and Copper (weekly chart) with a rising 40-week MA. | Long-term base breakouts tend to have long-term bullish implications.
Late Thought (paraphrase of Don Hagan’s insights from yesterday, 2.18.25): We’re closely monitoring commodity trends. Currently, 12 of 19 are above their 200-day moving averages, while just 10 have rising 200-day moving averages. Historically, this has been bullish for commodity prices, while some front-end purchasing may be occurring as tariff uncertainties persist. Commodity breadth isn’t pointing to a price spike but is likely firmer than the Fed would like to see.
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Art Huprich, CMT®
Chief Market Technician
Day Hagan Asset Management
—Written 02.17-18.2025. Chart source: Stockcharts.com unless otherwise noted.
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