LONG-TERM RELATIVE STRENGTH TRENDS FAVOR THE U.S., BUT ACCUMULATION PATTERNS ARE SHOWING UP OVERSEAS

 

Shown below is a relative strength trend of a proxy for the U.S. markets (S&P 500/2792.81) versus a proxy for the World ex the U.S. (SPDR S&P World ex-U.S. ETF Index/$29.10). When the long-term trend is rising, as it has been since 2008 (indicated by the green arrow in the chart below), the U.S. market is outperforming the rest of the world based on a long-term perspective. The long-term investment implication is that portfolios should be overweighted the U.S. markets during periods when the relative strength trend is rising. Currently, our models suggest the same, and we are invested accordingly.

At the same time, overseas markets can exhibit an improving/strengthening relative strength trend during some short-term tactical periods. This is currently the case, as shown by the blue arrows. The investment implication is that portfolios should have some exposure to international equity markets as well as domestic (U.S.) equity markets. Our models had also previously picked up on these shorter, more tactical trends, and we are invested accordingly.   

S&P 500 Large Cap Index/SPDR World
SPDR S&P World ex-US ETF Amex

Last-minute Addition: Following yesterday’s move up to tactical resistance at 2816 by the SPX and sharp high-volume intraday reversal lower, I want to paraphrase a few comments from last week’s Tech Talk report: 

  • Despite any near-term declines or consolidation periods, broad participation in the current uptrend is supportive of equity prices.  

  • At this point in the move up off the late-2018 low, the pace of the rally should slow.

  • Supportive breadth readings suggest that declines will be contained by a range of support for the S&P 500 of between 2731 and 2613.

  • A (decisive) close above 2816 would increase the odds of a move towards (2900), 2940.      

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UPCOMING EVENTS

Day Hagan Market Update Webinar with Donald Hagan, CFA, March 13, 2019 @ 4:15 PM EST

Day Hagan Technical Analysis Webinar with Art Huprich, CMT, March 19, 2019 @ 4:15 PM EST

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

—Written 03.04.2019. Chart sources: StockCharts. Special thanks to someone I used to interact with, David Keller of Sierra Alpha Research and former Director of Technical Research for a major sell-side investment firm

PDF Copy of Article: Day Hagan Tech Talk March 5, 2019 (PDF)

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