Day Hagan Tech Talk: The Grind Continues
A downloadable PDF copy of the Article: Day Hagan Tech Talk: The Grind Continues (pdf)
Summary
The best way to describe the tape action last week and since the October 2023 low is “the grind higher continues” (Figure 1). Fortunately, the grind higher has recently been taking on more participants (Figure 2), albeit hesitantly and with much consternation. Also, the number of New 52-Week Lows (a guidepost for when the odds of a meaningful decline increase—reach out for a chart) refuses to expand.
Condition vs. Signal
We’ve discussed before the need to differentiate between a condition and a signal (in this case a sell signal). A condition may be a divergence/non-confirmation between the price trend of an equity market index and a set of equity market internal measuring tools. It does not have a specific timeframe—the condition could last days, weeks, or a few months before a change of trend occurs or it gets resolved. In this case, we need to be aware of the suspect/unsupportive backdrop and manage risk accordingly. Alternatively, a sell signal occurs at a specific point in time—e.g., model change, momentum cross, moving average cross, trendline or price breakdown.
Between late December 2023 and February 2024, the domestic equity market was in a suspect condition. Yet our models/indicators did not register a specific sell signal. That remains the case, even with technology’s huge outperformance last week—see note below.
Figure 1: S&P 500. | Please refer to the verbiage inside the chart. In terms of support, please use the green uptrend line as well as the levels highlighted inside the thumbnail chart on the right.
Figure 2: Domestic Equity Market Proxies – weekly charts. | Besides the tech-heavy SPX (Figure 1) and “Index Movers,” broader areas of the domestic equity market have joined the fray higher—supportive.
You’re Killin’ Me, Smalls
The Small Cap complex has consistently underperformed, and it has also registered numerous false topside breakouts. The “you’re killin’ me, Smalls” frustration (from the 1993 film The Sandlot) is widespread, but I think that’s about to change.
Figure 3: Small Cap proxies - weekly chart. | More work is needed on a relative basis (versus Large Caps—please reach out for the chart). But from a price (trend) perspective, don’t be surprised by a stair step move (1.5 step higher, 1-step down) towards resistance (red lines)/2021 highs.
Note: Despite AAPL’s chart breakdown below $180 (resistance now between $180 and $185; meaningful support and price target = $165, $160 respectively), the technology proxy’s relative strength trend highlighted recently moved up through some resistance. But it continues to face more resistance overhead, defined as previous peaks. I will monitor it closely. At the same time, the semiconductor proxy’s relative strength trend shown did break out to the upside and up to this point has held. The software proxy’s relative strength trend remains rangebound—blasé for now. Please reach out for a chart of the group, or a specific sector proxy only.
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. Disclosures and Fact Sheet information 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 3.03-04.2024. 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.