RALLY TO RESISTANCE, STILL SHORT-TERM OVERBOUGHT, AND THE SUPER BOWL

 

The almost 10-year uptrend for the S&P 500 (SPX/2643.85) remains intact. However, following a violation of the uptrend line drawn off the 2016 low, historically strong “demand” readings following the 12/24/18 selling climax occurred. We highlighted this in our 1/8/19 Tech Talk report and 1/15/19 Technical Analysis webinar—please email me if you would like to see this information again. On a here and now tactical basis, the SPX has rallied into near-term resistance (please refer to the charts below) and remains overbought, as defined by the percentage of stocks above their 20-day EMA and now, also, the percentage of stocks above their 50-DMA. 

Additionally, while most of the country will be focused on the New England Patriots (despite having family in New England and respecting what he has accomplished, I am not a fan of Bill Belichick) and the Los Angeles Rams in the Super Bowl this Sunday, Wall Street’s version of the Super Bowl occurs this week.

 Specifically, J.P. Morgan wrote (emphasis theirs), “The week of Mon 1/28/19 is shaping up to be a major one w/a ton of big earnings along w/a slew of critical macro events (this will likely be the most important single week of CQ1), including an important Brexit vote in the UK parliament (on Tues 1/29), the next round of US-China talks (1/30-31 in Washington), the first FOMC decision of the year (1/30)…the US jobs report for Dec (2/1)...  US Q4 GDP is on the calendar for Wed 1/30 but this number probably won’t be released at that time (even though the shutdown is over, the gov’t prob. won’t have enough time to compile all the data required for this publication).”

Summary: Despite disappointing corporate reports from Caterpillar Inc. (CAT) and NVIDIA Corp. (NVDA), and the weakness last week by Intel Corp. (INTC), the rally off the 12/24/18 lows has been consolidating in a relatively orderly fashion. This supports the rally but also implies volatility in both directions will be high. Finally, to paraphrase what I stated last week, the domestic equity market should pull back. If it doesn’t, or if a pause/pullback is minor, then the underlying strength of the domestic equity market must be respected and adjusted to accordingly. Until then, please use the near-term tactical levels of support and resistance shown in the charts.

S&P 500 Large Cap Index Chart. Tactical near-term resistance (red) / support (green): 2675 - 2612 -2600
S&P 500 Large Cap Index. 1+ month, 30 minute chart with tactical resistance (red - 2675) and support (green - 2612 to 2600).

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UPCOMING EVENTS

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

—Written 01.28.2019. Chart sources: Stockcharts.   

PDF Copy of Article: Day Hagan Tech Talk January 29, 2019 (PDF)

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