Aided in part by a positive short-term Overbought/Oversold divergence and a successful test of support, the S&P 500 experienced the price stability/relief (rally) I highlighted in my Tech Talk report dated 10/30/18. Given the seasonal tailwind and positive MACD crossover (momentum indicator), I wouldn’t be surprised to see a bit more upside sandwiched by a lot of volatility in both directions following the mid-term elections. However:

  • The odds favor that some type of “low” was likely registered by the S&P 500 (SPX/2738.31) in late October (critical support for SPX is 2628/2603). Internal readings didn’t quite support the price gains last week (upside volume and advancing issues didn’t support the gains), and there was a large amount of “chart damage” that has not yet been repaired. Given this, until a “W-pattern” develops along with 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), broad (global and domestic markets move higher in sync), and sustainable internal readings or our models suggest otherwise, the SPX remains in “show me” mode. Chart below.

  • During the February decline, the SPX found support at its rising 200-DMA; not so during the October decline, when the 200-DMA was undercut. Consequently, the SPX’s 200-DMA, currently at 2764, is declining (another way of depicting a downtrend) and will now be a resistance point on rallies.

  • Equity markets will move off of trade talks/tweets about China. Concerns that the Fed is mismanaging the direction of interest rates will also remain at the forefront of investors’ and traders’ minds. Both will lead to intraday and day-to-day volatility.

  • Historically, the stock market does well after mid-term elections. However, I wouldn’t be surprised by a lot of volatility in both directions instead. Don’t panic. Let things settle down.

  • Value versus Growth (relative strength analysis): Please define your time frame, objectives and risk tolerance levels, because, on a near-term tactical basis, Value continues to outperform. Chart not shown.

  • U.S. versus the Rest of the World (relative strength analysis): Neutral to marginally positive in terms of the U.S. over International and select Emerging Markets. This may be an important tactical relationship into year-end/early 2019, especially if the U.S. loses more relative strength. Chart not shown.

  • Certain “risk on-risk off” indices bounced up off of or rallied up to important near-term inflection points. In other words, they are in “show me” mode and may be helpful near-term guideposts. Charts shown below.    


Show Me:


Show Me:


Show Me:


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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 after the market close on 11.05.2018. Chart sources: Stockcharts.    

PDF Copy of Article: Day Hagan Tech Talk November 6, 2018 (PDF)

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