LIFE

 

I am leaving in a few days for Richmond, Virginia, to speak at the Celebration of Life service for a 65-year-old friend I had known for 30 years. After I reflected on his life, my mindset shifted, and I thought about the similarities between life and the current condition of the domestic equity market. Specifically, in life, setbacks occur when “things” seem to be running relatively smoothly, and in the stock market there are rallies within downtrends, just like there are declines within uptrends.

With the S&P 500 (SPX) currently testing support, a near-term positive OBOS divergence, and the selling intensity on 10/26/18 being less than what it was on 10/11/18 despite the SPX being lower, the stage should be set for some short-term price stability/relief. However, given the amount of chart damage that has occurred, a lot more work (backing and filling—rallies and retests over time) is necessary for a tactical bottom to be established.  

 S&P 500 Large Cap Index Chart. RSI - Overbought/Oversold Tool.

Additionally, a number of levels of overhanging selling pressure can be identified (2725+/-, 2750+/-), as depicted in red (second chart) and by the flattening/declining 200-DMA, currently at 2766 (blue line in first chart).

 NASDAQ Thirty Minute Chart. DJIA Thirty Minute Chart. S&P 500 Thirty Minute Chart.

Summary: Since bull markets should respond favorably to oversold conditions—and so far that hasn’t occurred (this is bearish)—for me to have confidence that a short-term low (support) is in place, I would like to see a broad (global and domestic markets stabilize and move higher in sync), strong (NYSE Up Volume to total NYSE Up and Down volume being 90% or greater, or the NYSE Advancing volume beating NYSE Declining volume by a ratio of 10 to 1), and sustainable topside reaction, ideally leading to some type of breadth thrust. Until downside momentum is broken, an emphasis on managing risk appears prudent.

Day Hagan Asset Management appreciates being part of your business, either through our research efforts or investment strategies. Please let us know if we can do any additional work for you. 

UPCOMING EVENTS

Day Hagan Technical Analysis Tuesday Webinar with Art Huprich, CMT, November 13, 2018 at 4:15 PM EST.


Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

—Written before the market close on 10.29.2018. Chart sources: Stockcharts.  

PDF Copy of Article: Day Hagan Tech Talk October 30, 2018 (pdf)

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 Day Hagan Asset Management, an SEC registered investment advisory firm. Accounts held at Raymond James and Associates, Inc. (member NYSE, SIPC). None of the entities listed here in this disclosure are affiliated.