Day Hagan Tech Talk: Same Old, Same Old
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Summary
The market remains overbought, with sentiment still relatively complacent, as I noted last week. When combined with proximity to resistance, the ingredients are still in place for a pause/pullback.
Reaction to News
I have long believed that the market’s or a stock’s short-term reaction to news can be a more revealing guidepost than the news itself. In this vein, the broad domestic equity market’s inability to rally on yesterday's seemingly bullish news about NVDA—a component of the DJIA, SPX, and NASDAQ—is a sign of waning near-term momentum. Accordingly, I think the chart in Figure 1 better reflects the current short-term backdrop for domestic equities instead of the technology-weighted NASDAQ’s new high yesterday, driven largely by NVDA. That said, even with the potential for a short-term pullback or period of consolidation, we will remain fully invested relative to our equity benchmark, as dictated by the Day Hagan Catastrophic Stop Loss model. Please reach out for details or Don Hagan’s most recent insights.
Figure 1: NYSE Composite. | Red lines depict resistance (selling pressure); green lines depict support.
Note: The S&P 500 (SPX) chart continues to exhibit a similar resistance line and momentum trend, as shown in Figure 1, which was highlighted in last week’s report. Please reach out for an updated version. Very minor support for SPX is in the vicinity of 6200, with a better pocket of support between approximately 6150 and 6050.
Bearish to Bullish
In our latest Smart Sector International Strategy update, our models recommended overweighting China. Please reach out for details about the features and benefits of the strategy.
Figure 2: CSI China Internet ETF (KWEB). | Within the context of managing risk, KWEB might be a good way to participate in the Chinese overweight.
Base on Base
During my Chart Jamboree in March, Copper was trading at $5.09. Within a bullish overall chart configuration, tactically, I noted that bullish sentiment was excessive, and a pause/pullback would be healthy and buyable. Copper then pulled back to its rising 30-week MA at $4.35, recently hitting $5.64 intraday.
Have tariffs played a role in this move? Probably. But I don’t want to build a narrative to explain price movement. As a Wall Street veteran once said (paraphrased), “It’s price movement that creates narratives.” This perspective resonates for those, like me, who focus on studying price movement.
Figure 3: Copper-Continuous Contract with Momentum (monthly data). | I expect Copper to rise in a stair-step fashion. Please review the chart’s verbiage and manage risk accordingly.
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Art Huprich, CMT®
Chief Market Technician
Day Hagan Asset Management
—Written 7.14-15.25. Chart source: Stockcharts.com unless otherwise noted.
Disclosure
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