DAY HAGAN TECH TALK JULY 30, 2018

 

The price action of the S&P 500 for the month of July, the start of the second half of 2018, looks similar to the price action for the month of January, the start of the first half of 2018. Despite this observation, I remain of the opinion that Large Cap indices, defined as the S&P 500 (SPX/2818.82) and Dow Jones Industrial Average (DJIA/25451.06), remain in consolidation mode despite many areas of strength. Within this context, the odds favor a short-term consolidation/further downside probing, while the longer-term technical underpinnings I follow support an ongoing secular Bull market.

MARKET MESSAGES

  • Value’s relative price trend versus Growth, discussed in our July webinar, had already stabilized and started to improve. However, when news from both Facebook (FB) and Twitter (TWTR) wasn’t taken kindly, Value over Growth gained speed last week. The odds favor that this continues—chart below.  
  • Small Cap underperformance versus Large Cap continues. While I consider seasonal influences as secondary indicators, Bruce Bittles and William Delwiche suggest, “For stocks overall, the weakest portion of the presidential election cycle is the months leading up to mid-term elections. This is even more so the case with small-caps….”  I think this will continue in the short term.
  • An example of the price direction of “FANG” is the First Trust Internet Index Fund (FDN/$139.88). Currently, FDN is more than 12% to 14% above its rising 200-DMA/November 2016 uptrend line, at $122.69 and $120 respectively. Consequently, the odds favor additional corrective time or price risk.
  • With corporate earnings upon us, continuing economic and political events, tweets from President Trump, et cetera, please don’t be surprised by an increase in market volatility, in both directions!
 Mega Cap Value versus Meaga Cap Growth. Russell 2000 Value vs Russell 2000 Growth. 

Another way to view Value vs. Growth is to examine the relative price trend of Consumer Discretion—used in this case to represent Growth—and Consumer Staples, used in this example as Value. Lending credence to the chart above, on a short-term basis Value is outperforming Growth.

 Consumer Discretion (Growth) versus Consumer Staples (Value) Chart. 
 First Trust Dow Jones Internet Index Fund NYSE Chart. Momentuam (MACD): negative non-confirmation between price (lower frame) and this indicator. 

S&P 500, as paraphrased best by an article I read over the weekend, is “still range bound until proven otherwise. And that might involve more than just breaking above the January all-time closing high of 2782.87, it means staying there.”

 S&P 500 Large Cap Index Chart. Selling pressure (resistance): 2850 to 2873. 2800 ti 2790: range of support that tactical traders/investors should focus on. If this range of support is to light or to close, based on your tolerance for risk, please use the additional levels of support shown, in green. 

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UPCOMING EVENTS

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

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

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

—Written 07.28-29.2018. Chart sources: Stockcharts.com. 

PDF Copy of Article: Day Hagan Tech Talk July 30, 2018 (PDF)

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