Day Hagan Tech Talk: Spring Ahead, Fall Back
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Summary
Although we set our clocks ahead over the weekend, stock prices fell back as macro risk and political headline fatigue weighs heavily on Wall Street’s psyche. An oversold rally is due (Figure 1). If it doesn’t occur soon, it will be bearish.
Dare I Say?
The prevailing wisdom is not to speak about religion and politics when addressing crowds, but considering the current domestic backdrop, that’s too much to ask.
The domestic equity market has been littered with unknowns: Tariffs. Inflation. Trade wars. Dare I say: Politics. Politicians are infusing uncertainty into the equity market. Bob Byrne aptly stated, “In my experience, politicians generally equate to trading frustration. The markets hate unknowns, and politicians are the head chefs famous for cooking up the unknown.” We’re feeling this now.
Two positive divergences, dare I say? Despite a new reactionary closing low yesterday (3.11.25):
1) New 52-Week Lows did not exceed readings from early last week. Rebalancing rather than wholesale selling.
2) Large Cap Advance-Decline Lines have not dropped below their January lows. The S&P 500 Equal Weight Index is down 2.18% year to date (YTD), while the Large Cap Growth Heavy S&P 500 (Index Movers) has fallen 5.26% YTD. Rotation! This is coupled with a profoundly pessimistic reading from the NDR Daily Sentiment Composite—below its October 2022 low—and will be bullish short-term when it turns up from these levels.
Figure 1: High Beta proxy vs. Low Beta proxy. | Approaching short-term (tactical) extremes.
The main gist of Figure 2 is to depict an initial downside price target, as well as the many overhanging levels of potential selling pressure (resistance), to be used accordingly during near-term bounces.
Figure 2: S&P 500. | Please see verbiage inside the chart. Resistance levels noted in red.
Figure 3: S&P 500 (weekly). | An old friend and I used to ask each other, “What is the least likely scenario?” and “What is the worst-case scenario?”
Going forward: We now need some price stability (backing and filling) to build a new base of support and/or strong upside buying interest to chew through the overhanging selling pressure (resistance). Otherwise, until the price pattern of lower peaks and lower troughs is broken, the downtrend reigns.
Warren Pies, with 3Fourteen Research, pointed out “the combination of the upcoming Fed meeting (3/19) and the April tax season liquidity drain argue for patience.” Time will tell. The 3Fourteen chart in Figure 4 is not part of our model input, but it can help discern the backdrop.
Figure 4: S&P 500 Cycle Composite for 2025. | Based on this chart alone, a volatile March, in both directions, should be expected, followed by a strong period between April and early July.
There is Usually a Bull Market Somewhere
Figure 5: Bearish to Bullish Chart Configuration. | Weekly charts all include a rising 40-week MA.
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Art Huprich, CMT®
Chief Market Technician
Day Hagan Asset Management
—Written 3.10-11.25. Chart source: Stockcharts.com unless otherwise noted.
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