DAY HAGAN TECH TALK MARCH 27, 2018

 

The technical observations below are a response to numerous articles over the weekend that included some sort of reference to the following: “1987—22% one-day decline, 36% decline from high to low, “…the Next Crash…,” “the Good, the Bad and the Ugly…” etc.

OBSERVATIONS

  • Stocks favored over Fixed Income, from a longer-term perspective.
    • Advance-Decline analysis remains supportive of equities, from a longer-term perspective.
    • Relative strength trend of Commodities versus stocks is bottoming. This suggests having some type of exposure to the commodity universe.
      • Gold: Lengthy bottoming process isn’t complete, but it continues.
  • A multi-month consolidation period would not be unusual. Refer to report dated 3/20/18 for specifics. 
  • S&P 500 is in “retest” mode (last Friday’s sell-off was less pressure-ridden when compared to the early February low, a positive development).
    • Sentiment: Total Put-Call ratios reached levels that suggested the odds favor a bounce up off support. If this proves correct, the key to the sustainability of any future rally attempts will be for “pessimism” to continue, and for buying demand to remain strong, evident by a string of days during which NYSE Advancing Volume leads NYSE Declining Volume by at least a 9 to 1 ratio, or some type of Breadth Thrust. 
    • Odds favor 1% daily moves, both up and down, will continue.
 Stocks (S&P 500) versus Fixed Income (TLT). Rising Line: Stocks Outperform. Falling Line: Stocks underperform. When the red up trend line was broken, Fixed Income outperformed Stocks, in earnest. Currently Stocks are outperforming. 
 S&P 600 Small Cap Advance - Decline Line. S&P 500 Large Cap Advance - Decline Line. Recent new highs by A/D lines (green circles) is supportive of equities, from a longer-term perspective. NYSE Common Stock Only Advance - Decline Line. 
 SPDR Gold Shares (GLD) - Weekly. A weekly close above $130 - $131 would have bullish implications, from a non-trading persepctive. 
 S&P 500 Large Index. 40 week moving average (200-day) support: 2585 (blue dashed line & green up trend line).
 S&P 500 with 1 percent Rate of Change - Blue horizontal lines. 

Day Hagan Asset Management appreciates being part of your business, either through our research efforts or investment strategies.   

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

—Written on 03.26.2018. Chart sources: Stockcharts.com.

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