Summary: The S&P 500 has more work to do before I change my near-term "cautious" tactical view. A move above the broken trend line shown below and the recent price peak at 2475 (resistance), would be viewed positively, and aid in discerning any future near-term downside volatility. In the meantime, please continue to identify and manage downside risk tolerance levels.

The current pullback by the domestic market indices didn't reach fully "washed out levels," as discussed in our Tech Talk report dated 8/15/17. However, the S&P 500 did come close to recording an "oversold" level when viewing its percentage of component stocks above the 20-DMA, as well as proximity to the lower Bollinger Band, drawn two standard deviations below its 50-DMA. That is the good news—chart below.

What still leaves us cautious on a near-term tactical basis? The S&P 500 has not been able to get back above a broken uptrend line, meaning a loss of upside price momentum, and the odds favor more volatility during a historically difficult season for the equity markets. The one-time "A-D Line non-confirmation" that we highlighted in the above-referenced Tech Talk also remains in effect. If you would like to see that report again, please let me know.

Percent of S&P 500 Stocks Above the 20-DMA.

Have a wonderful start to your week. Please know that Day Hagan Asset Management appreciates your support and hard work!

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

—Written 8.22.2017. Chart sources:

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