Day Hagan Tech Talk: Close Enough for Government Work
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Summary
During Q324, with the S&P 500 near 5700, we highlighted 5900 and 6100 price targets. SPX printed 6099.97 last week. The Catastrophic Stop model remains bullish, but resistance, negative A/D Line divergences again, and a lot of bullishness suggest volatility in the next few weeks.
6100+/-
With DOGE looming in the background, “government work” takes on an interesting meaning.
Following the initial broad, post-election topside surge by the domestic equity market, the Index Movers (Large Cap Technology/Mag 7) have been in vogue, basically at the expense of the broad market (Figure 1). This has once again produced negative Advance-Decline divergences (a condition, not a signal—please reach out for a chart). Also, the Dow Jones Transports has given back a good portion of its post-election rally, and Dow Jones Utilities has given back all of its own rally.
Figure 1: Mag 7 Proxy (top frame) and S&P 500 Equal Weight (SPXEW—bottom frame). | It will be a problem if SPXEW doesn’t bounce off support (green line), or another lower peak occurs.
Questions: Will the Index Movers take a break? At the same time, will other parts of the market start to participate more fully again? The answers to these questions make for interesting conversation into year-end since rotation is one characteristic of an enduring uptrend and has been a theme during 2024. The pullback or consolidation (volatility) I discussed this month occurred in the broad market, but I hope the broad market re-rallies, because it will signal an increase in upside participation and help nullify the negative A/D conditions, relative to both NYSE Advancing Volume and NYSE Advancing Issues. Therefore, I expect volatility into year-end.
Figure 2: S&P 500 with Rising 21-day MA – 6-month chart. |Trend remains intact. Please note the verbiage inside the chart. Support in green and blue, resistance in red.
Note: In early 2025, Wall Street may rebalance portfolios versus doing so prior to the end of 2024, postponing taxes on substantial capital gains.
Figure 3: Crude Oil with Momentum (MACD) – weekly data. | If support in the middle-to-low $60s fails to hold (green line and price labels), “Katy, bar the door.”
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Art Huprich, CMT®
Chief Market Technician
Day Hagan Asset Management
—Written 12.09-10.2024. Chart source: Stockcharts.com unless otherwise noted.
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