Day Hagan Tech Talk: Swirl
A downloadable PDF copy of the Article: Day Hagan Tech Talk: Swirl (pdf)
Summary
Many domestic equity market indices and the NYSE all issues Advance-Decline Line (A/D Line) had been moving sideways. That is no longer the case as the lateral pattern resolved higher—bullish and supportive of a stair-step move higher.
Round and Round
Many domestic equity-market indices and certain internal measuring tools had been exhibiting a twisting, spiraling swirl since early to mid-May. However, with Small Cap proxies joining the party and participating on the upside (Figure 1), most of the patterns have broken out topside. This supports higher prices.
I'm not saying that we'll see a straight up-move. Pullbacks will occur. But unless our models suggest otherwise, or we experience another string of negative A/D Line non-confirmations, new all-time highs are in the making for Large Cap equity indices, and ultimately Small Cap equity proxies/indices.
Figure 1: S&P 600 Small Cap Index with Momentum and rising 10-week MA. | Weekly charts are a bit different from last week’s daily charts, but the bullish pattern of accumulation is still evident.
Figure 2: Small Cap Equity Positioning: “There is comparatively no interest in small caps, with investor positioning in small cap stocks ticking up off the bottom end of the range.” This implies a lot of fuel exists, which could be added to the fire. Can we say “short squeeze?”
Figure 3: S&P 500 with Momentum and rising 40-week MA. | Please refer to the verbiage inside the chart.
One Glance
Having highlighted Silver last February (“Big Base Breakout”) and again in March (“Bearish to Bullish” chart configuration), I have been remiss in further commentary. Until now.
Stan Weinstein, whose book Profiting in Bull and Bear Markets is a classic for those who study demand and supply generated chart configurations, once remarked, “One glance is worth a thousand earnings forecasts. The tape tells all, and our job is to learn how to listen properly.”
A glance at a chart of Silver shows one price pattern that Silver has consistently exhibited time and time again: a period basing (sometimes lengthy) followed by a topside breakout. This is then followed by a period of basing (sometimes lengthy) and another topside breakout—rinse and repeat (Figure 4). Within that context, bullish sentiment is currently getting a bit excessive for many metals (silver, platinum, gold) or moving in that direction (palladium, copper). Buy pullbacks, considering the volatile nature of Silver (and commodities as a whole), will occur.
Figure 4: Silver with Momentum. | $38 to $40 is the first target followed by something north of $44-$45, maybe $50.
The Day Hagan Smart Sector Strategies incorporate built-in risk management parameters relating to sector allocation and equity-versus-cash allocation. Please let me know if you would like to schedule a call to discuss the process and discipline underpinning our Smart Sector with Catastrophic Stop, Smart Sector International, and Smart Sector Fixed Income strategies. Disclosures and Fact Sheets can be found here: https://dhfunds.com/literature.
Day Hagan Asset Management appreciates being part of your business, either through our research efforts or investment strategies. Please let us know how we can further support you.
Art Huprich, CMT®
Chief Market Technician
Day Hagan Asset Management
—Written 06.09-10.25. Chart source: Stockcharts.com unless otherwise noted.
Disclosure
The data and analysis contained herein are provided “as is” and without warranty of any kind, either express or implied. Day Hagan Asset Management (DHAM), any of its affiliates or employees, or any third-party data provider, shall not have any liability for any loss sustained by anyone who has relied on the information contained in any Day Hagan Asset Management literature or marketing materials. All opinions expressed herein are subject to change without notice, and you should always obtain current information and perform due diligence before investing. DHAM accounts that DHAM, or its affiliated companies manage, or their respective shareholders, directors, officers and/or employees, may have long or short positions in the securities discussed herein and may purchase or sell such securities without notice. The securities mentioned in this document may not be eligible for sale in some states or countries, nor be suitable for all types of investors; their value and income they produce may fluctuate and/or be adversely affected by exchange rates, interest rates or other factors.
Investment advisory services offered through Donald L. Hagan, LLC, a SEC registered investment advisory firm. Accounts held at Raymond James and Associates, Inc. (member NYSE, SIPC) and Charles Schwab & Co., Inc. (member FINRA, SIPC). Day Hagan Asset Management is a dba of Donald L. Hagan, LLC.