Day Hagan Tech Talk: Say What?
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Summary
Many finally became aware of the unwinding speculative stock market activity in the Index Movers, Quantum stocks, crypto, IPO proxy, and penny stocks that had run up on above-average volume.
What We Can and Can’t Say
The Bears finally wrested control.
No longer can we discuss the following:
S&P 500 (SPX) remains confined to a lateral trading range. It has broken down, using closing prices. Please reach out for a chart using closing prices.
Previous price lows (support) are still containing selloffs. Not anymore. Not for many domestic equity market proxies. It would be bullish (short-term) if the recent breakdown were false. We may need to wait for Friday’s employment report to get an answer.
SPX hasn’t tested its rising 200-day MA support in a while. It did so yesterday, 3/4/25—Figure 1.
We can still say the following:
NASDAQ marginally violated its rising 200-day MA support line, an area that has generated buying interest two previous times—Figure 2. But it hasn’t stabilized below this area of support.
Credit spreads bear watching closely—Figure 3.
During yesterday’s early selloff, there were initial signs of panic-selling based on the percentage of NYSE Declining Volume and Issues hitting 80%+. A 90% reading would imply wholesale panic, which, while painful, may be welcomed if it occurs. We should know soon—see bullet point two above.
Figure 1: S&P 500 with rising 200-day MA support. | Please see the verbiage inside the chart, including support (green and blue), resistance (red), and “Bottom Line” below.
Figure 2: NASDAQ with rising 200-day MA support. | Yet again, the rising 200-day MA support held.
Bottom Line: Following the third Advance-Decline Line divergence (negative non-confirmation) and considering an oversold condition and extreme pessimism (NDR Daily Trading Sentiment Composite has approached October 2022 levels), we now need price stability (base building) and/or strong buying interest to work through resistance. “Participation” readings also need to be monitored closely.
Bears Watching
Credit spreads have proven helpful in discerning risk appetite. If there is stress in the financial system, it will be visible in credit spreads. While credit spreads are currently constructive for equities, the fixed-income arena may wave a yellow or red flag if they keep widening.
Figure 3: High Yield Option Adjusted Spreads. | Stability above the red line would be concerning.
Figure 4: CBOE 10-Year U.S. Treasury Yield Index (TNX/42.10). | While a move higher should occur in this area, Friday’s employment report will dictate a lot.
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Art Huprich, CMT®
Chief Market Technician
Day Hagan Asset Management
—Written 3.01.2025 and 3.04.2025. Chart source: Stockcharts.com unless otherwise noted.
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