DAY HAGAN TECH TALK JULY 23, 2018

 

Between August 2017 and January 2018 (22 weeks), the S&P 500 (SPX/2801.83), Russell 2000 Index (RUT/1696.81) and the NASDAQ (COMPQ/7820.20) gained approximately 19%, 20% and 21% respectively. As a result, their respective chart configurations took on an almost parabolic (straight up) shape. As a consequence of this sharp price move over a relatively short time period, there is nothing, in my opinion, sinister about the multi-quarter lateral price action taken on by the large cap universe. Wall Street participants would benefit from maintaining an unemotional investment process where risk management (cutting losses and taking profits) and patience are of extreme importance.

When viewed from the perspective of “New 52-week highs,” the domestic equity market has narrowed. However, while this indicator partially helps discern the equity market’s internal backdrop, it is not a good timing indicator. When viewed from a different perspective (first chart) I don’t think the Large Cap domestic equity market is being driven by just a handful of stocks.  

 S&P 500 Equal Weight Chart. S&P 500 (Cap Weighted). In my opinion, if the "market" was being driven by only a few stocks, the difference from their January highs would be much greater then what is shown here. 
 I would not be surprised by a period of down side volatility, given slowing momentum, overhead resistance (2822 and 2839 to 2854) and approaching sloppy period. Parabolic move and consolidation discussed on Page 1. Initial Support (green line) between 2771 and 2760, 2740ish and 2725. 

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UPCOMING EVENTS:

Global Macroeconomic Webinar – Don Hagan, CFA, August 8, 2018 @ 4:15pm

Technical Analysis Tuesday Webinar – Art Huprich, CMT, August 21, 2018 @ 4:15pm

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

—Written 07.22.2018. Chart sources: Stockcharts.com. 

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