Day Hagan Tech Talk: #!%@!
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Summary
Within the context of a supportive price pattern of a higher trough & higher peak (Figure 2), Wall Street appears frustrated as domestic equity market indices struggle with overhanging selling pressure (resistance). It’s not clear yet whether a consolidation pattern develops or if further downside probing occurs.
Anger, Frustration, or Rage
The more economically sensitive Small Cap proxy and technology-centric NASDAQ and S&P 500 fell 3.39%, 2.41%, and 1.11% respectively during last week’s tape action. I believe the title of this report—a grawlix, which conveys an outburst or anger, frustration, or rage through typographical symbols—accurately describes the current short-term mindset of certain Wall Street participants, especially those associated with the “FANG” and “MEME” (low-quality/high-beta stocks) complex. See Table 1 and Figure 1.
Table 1: NYSE Fang Plus Index – one week performance of select components, through 2.10.23. | As we move through early 2023, I would not be surprised by a continuation of this type of volatility, in both directions, on a daily and weekly basis. To better visual this type of volatility, in addition to the figures shown below, please refer to the January 31, 2023 Tech Talk report.
Figure 1: NYSE FANG+ Index and MEME exchange-traded fund – Year-to-Date Performance, through 2.10.23.|A good example of how near-term, “straight-up” type moves usually end—a price correction, not a consolidation—and why it is prudent to manage risk along the way.
Figure 2: S&P 500 – weekly with 200-week MA. | A non-trading perspective shows a supportive price structure of a higher trough and higher peak. So far, so good.
Resistance To Support: A Mean Reversion Type Move?
Partially due to a higher U.S. Dollar and higher 10-year U.S. treasury yield (both short-term), my bias towards the SPX leans towards a period of consolidation with a slightly lower bent from here (see support in Figure 3). However, more important than my opinion will be how equity market indices and risk-on areas of the equity market react to tomorrow’s CPI report. This will help discern whether “stocks” consolidate or experience further downside probing, as alluded to in our summary statement.
Figure 3: S&P 500 – daily. | Will we get some Valentine’s Day love following the CPI report, or not? While we wait for some resolve, please be cognizant of the resistance and support levels shown inside the chart. Note: The 200-day MA, not shown and currently at 3945, is no longer declining but starting to stabilize—a positive change.
Figure 4: iShares Russell 2000 ETF – Small Cap proxy. | Through resistance that became support (lower horizontal red/green line), up to resistance (red horizontal line), and back down to support. A violation of either area will likely dictate the proxy’s next short-term directional move.
Figure 5: NASDAQ Composite – daily. | Similar to Figure 4, through resistance that became support (lower red/green line), up to resistance (red line), and back down to support (red/green line and green dashed line). A violation of either area will likely dictate the index’s next short-term directional move. NOTE: It’s encouraging that the top end of the recent base breakout contained last week’s decline.
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Art Huprich, CMT®
Chief Market Technician
Day Hagan Asset Management
—Written 2.12.2023. Chart and table source: Stockcharts.com unless otherwise noted.
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