EARLY 2019 OBSERVATIONS
S&P 500 (SPX/2549.69): Following a brutal sell-off in December, which produced the deepest oversold readings since 2011, longer-term support levels held. This kept the almost 10-year uptrend intact—chart below.
For almost 12 months, Don Hagan and I have been discussing the need for signs of “strong (and broad) demand.” Finally, it occurred. On December 26 and January 4, NYSE advancing to declining volume was well over the 10-to-1 ratio we wanted to see. My interpretation of this, following an almost 20% decline by the SPX and still a lot of investor pessimism, is that the odds favor downside momentum has been broken and a necessary bottoming sequence has started. Tactical resistance (selling pressure) for the SPX exists between 2600 and approximately 2650—multiple levels of additional resistance exist above 2650. Going forward I would agree with Bruce Bittles, who recently stated “how far this can carry will likely be dictated by (future) breadth and sentiment readings.” I would label the 1/3/19 intraday low of 2443 as tactical support for the SPX – chart below.
Long-Term Oversold Readings: While the domestic market tested and held long-term support levels, the Emerging Markets proxy came down to a long-term oversold level, defined by a flattening-to-rising monthly lower Bollinger Band—an area that, for the majority of cases since 2011, has produced a top-side move.
Risk-On Relationships (relative strength analysis): On a short-term basis, Wall Street has taken a desire to own stocks—take on risk.
Crude Oil: Long-term oversold level holds, as does lateral support. A lengthy trading range period may now be developing, defined by $42.50/$39 support and $77/$78 resistance. Currently, Crude Oil is closer to the lower end of this potential trading range, favoring the upside. Chart below.
Themes Over the Next Decade (this writer’s opinion only, listed in no particular order, and risk must be managed): While there are always obstacles and risks, these themes intrigue me and they have recently come down to some type of significant support level, as highlighted on the respective chart: Cyber Security (HACK) / Social Media (SOCL) / Artificial Intelligence & Robotics (BOTZ) / Cloud Computing (SKYY) / Marijuana (MJ).
Besides the NYSE volume figures discussed on page one, “strong demand” was also evident on an “issue” (stock) level.
Risk seeking proxies are gaining strength, on a near-term basis versus risk averse proxies. As long as this continues, it implies upside probing.
Day Hagan Asset Management thanks you for allowing us to be part of your success!
Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management
—Written during and after the market close on 01.07.2019. Chart sources: Stockcharts.
PDF Copy of Article: Day Hagan Tech Talk January 8, 2019 (PDF)
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