Day Hagan Tech Talk: The Wisdom of Price
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Summary
Within the context of the S&P 500’s continuing uptrend—a price pattern of higher troughs and higher peaks—broader upside participation that started around June 1 but had stalled occurred again last week and for the entire month of June (Figures 1 & 2). Thus, last week’s observation of a short-term shift lower by large cap growth/technology was, at worst, wrong and, at best, early.
Listen, Don’t Force
David Lundgren, whom I met with while he was working at Wellington Management, recently wrote about the “wisdom of price.” Mr. Lundgren is a big proponent of “trend and momentum” investing, believing that it brings added value to the process of making investment decisions. Personally, I agree. Throughout a major portion of the domestic equity market, “trend and momentum” was evident last week and, for that matter, the entire month of June. In other words, “listen to the market (price), don’t force your opinion on it.” Relative to large cap growth/technology, I maintain “Follow the FANG”—NYSE FANG+ Index. Reach out for specifics.
Figure 1: Select Domestic Equity Market Proxies – 1-Month Performance. | It is encouraging that Mid-Caps and Small Caps outperformed Large Cap Growth/Technology during June. A continuation of this trend is needed as we move into 2H23. Even the stodgy DJIA had a good month.
Figure 2: S&P Sector Performance between June 15 and June 23. | Since the S&P 500’s very near-term closing high on June 15, we have seen a broader range of underperformance when compared to the S&P 500’s decline during the same time. Unless this is remedied (upside participation broadens again), it will be harder to extend the SPX’s current trend deeper into 2H23.
Figure 3: S&P 500. | Once new month/new quarter inflows run their course, with the lower end of a layer of resistance close by, how the SPX handles a test of support will be a good guidepost (see chart), especially given sentiment (too complacent) and an early July headwind per NDR’s S&P 500 Cycle Composite for 2023.
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Art Huprich, CMT®
Chief Market Technician
Day Hagan Asset Management
—Written 07.02.2023. Chart source: Stockcharts.com unless otherwise noted.
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