The Small Cap chart (Russell 2000 [RUT/1443.09]) has been awful. Most charts of the international market have been awful. Momentum stock charts (FAANG) have been awful. Many commodity charts have been awful. The D.J. Transportation Average (TRAN/9876.54) has dramatically sold off, even with lower energy prices. Large Cap indexes (S&P 500 [SPX/2637.32]) has been flat to down. The CBOE 10-Year U.S. Treasury Yield Index (TNX/28.56 = 2.85% yield) has fallen from 32.48 (3.25%, rounded) to 28.25 (2.82%). The economy is supposedly on solid footing, but based on chart patterns, a student of technical analysis would likely disagree. Many price-based charts have been down, negative, or bearish for weeks—if not months.  

However, within this sea of negativity (weak technical backdrop), a potential short-term equity market green shoot emerged yesterday (12/10/18) amidst a broad intraday equity market sell-off. Apple, Inc. (AAPL/$169.60) declined right to the upper end of a support range, which I’ve defined using retracement levels and previous price lows. It then recorded a sharp, above-average volume intraday reversal upwards, closing near its intraday high. The reversal also occurred at a statistically oversold level, defined by a lower Bollinger Band drawn around a 20-DMA. Please refer to the two charts below.

Apple Inc Nasdaq GS Chart, December 10, 2018. Retracement support levels drawn off the 2013 to 2018 and 2016 to 2018 rallies, equate to $163 and $158. The 12/10/2018 low as $163.33. When coupled with a range of support between $159 and $148 (green rectangle), I think the stock is closer to some type of lengthy base building period, versus another 30 percent decline, as just happened.

As the short-term observation about AAPL (and the domestic equity market for that matter) states below, the key right now is upside follow-through.

Apple Ince (AAPL) Six Month Chart. Above average volume reversal, from down to up, took place at a statistically oversold level.

Given AAPL’s previous leadership qualities (strong relative strength), the stock’s reversal encourages those watching for a successful equity-market-base building period.  

For the broader domestic equity market, strong and broad buying interest needs to show up to break this seasonal funk. We’d like to see a combination of 1) multiple days when the NYSE advancing volume beats declining volume by a 10 to 1 ratio, 2) NYSE advancing volume being 80% or greater of total NYSE advancing and declining volume, 3) a series of breadth thrusts occurring, and 4) both domestic and international markets rally together.  

In managing risk into year-end, I would draw a line-in-the-sand support range, defined by the 10/29/18 intraday low and the 12/10/18 intraday low. For the S&P 500, that range of support is between 2603 and 2583.

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 12.10.2018. Chart sources: Stockcharts.       

PDF Copy of Article: Day Hagan Tech Talk December 11, 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.