Day Hagan Tech Talk: Texas Hold’em
A downloadable PDF copy of the Article: Day Hagan Tech Talk: Texas Hold’em (pdf)
Summary
Following recent near-term positive/supportive oversold stochastic levels accompanied by large intraday price swings, the S&P 500 just posted its first positive week in August, breaking a 3-week downtrend. If stocks have settled down, this begs the question…
What’s the Next Card in the Deck?
During a recent vacation at Indian Beach, North Carolina, I was cajoled into playing Texas Hold’em. While I am always up for a good game of cards, I am not a poker player. If you are unfamiliar, as I was, with Texas Hold’em, each player is dealt two pocket cards, and then five community cards are revealed. There are four rounds of bets—once after the hole cards are dealt, and then three rounds as different community cards are revealed. This is why participants are always contemplating, “what’s the next card going to be,” as players must make the best poker hand combination possible with their five cards. There is more to it, but you get the gist.
To try to identify important near-term turning points for the equity market, Wall Street participants are also asking, “What’s the next card coming out of the deck?” To keep this concise due to preparation for Hurricane Idalia, I am only including Figures 1 & 2.
Figure 1: S&P 500. | Our models view the intermediate-term uptrend as intact, though several indicators have moved closer to neutral. For the near term, until resistance is violated on the upside or support is violated on the downside, the odds favor that the SPX consolidates as additional “cards” are pulled from the deck.
Let me reiterate that the quality of any future equity market rallies/rally attempts will help determine their sticking power, or lack thereof. Among a few factors, this would include:
Absorbing bad economic or corporate news (not significantly selling off and staying down).
Rallying broadly on good news. The advance on 8/28/23 was stronger than what we have seen in a while—we consider this supportive.
Figure 2: 10-Year U.S. Treasury Yield Index (TNX/42.12 = 4.21%). | The movement by the 10-year yield post-Jackson Hole may be a very telling cue for equities. While I believe interest rates will ultimately work higher, on a short-term basis, a close below 41.98/39.84 will be a catalyst for higher fixed-income proxies and likely equity prices as well.
Please let me know if you would like to schedule a call to go over the process and discipline underpinning our Smart Sector with Catastrophic Stop, Smart Sector International, and/or Smart Sector Fixed Income strategies.
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 08.28.2023. Chart source: Stockcharts.com unless otherwise noted.
Future Online Events
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.