Day Hagan Tech Talk: Like a Hot Knife Through Butter
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Summary
The S&P 500 cut through resistance like a hot knife through butter, closing at a new high. Index Movers and Small Caps participated. Yet, domestic A/D Lines recorded a second non-confirmation (Figure 1), and New High readings, though not a good timing tool, reflect a diverging backdrop.
Uptrend Intact but Internals Slightly Bent
Last week, I noted that I expected the recent levels of overhanging selling pressure (resistance) to make a much bigger stand and persist much longer than they did. I was wrong.
The Large/Mega Cap uptrend is still intact (higher price troughs and higher price peaks—Figure 2); the Day Hagan Catastrophic Stop Loss model is still favorable; and the Russell 3000 volume demand minus volume supply relationship retains a supportive longer-term trend. Simultaneously, Small Cap proxies remain rangebound but are slowly improving. Stabilization above $227/$230 by the Russell 2000 ETF (IWM/$226.81) would likely lead to some shorts getting squeezed and a possible equity market melt-up move. However, on a short-term tactical basis, Internal readings of momentum and, to a degree, breadth, are churning. Until there is some resolution, a strategy that has built-in risk management buffers seems prudent, e.g., Day Hagan Smart Sector strategy and Day Hagan Smart Buffer strategy.
Figure 1: S&P 500 and Various Advance-Decline Lines (A/D Lines). | Please review the comments in the chart. There is a lot to focus on and monitor.
Figure 2: S&P 500 with rising 50-day MA support. | Please refer to the comments in the chart. Also, a pocket of initial downside support exists between 6213 and 6150. Stabilization below support would increase the odds of a deeper pullback, but not until then.
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Art Huprich, CMT®
Chief Market Technician
Day Hagan Asset Management
—Written 8.11-12.25. Chart source: Stockcharts.com unless otherwise noted.
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