Following last week’s tape action, during which the S&P 500 (SPX) declined approximately 2.5%, our Chief Investment Strategist, Don Hagan, and I discussed the equity markets’ responses to President Trump’s tweets. In May, the SPX fell just over 6.5%. In my opinion, the unease around trade wars with China, Mexico, and possibly Australia was one culprit for last week’s and last month’s tape action. Who is next?

As uncertainty abounds, so does a desire to remove risk from portfolios—sell/reduce stocks. This is one reason why I have stressed over the past month or so that investors “implement an investment strategy that manages risk and is supported by an unemotional process that combines economic, fundamental and technical analysis—one that overweights statistical probability and underweights emotion.”

Now What? While daily statistics are at or close to oversold levels (chart below, using percentage of stocks above 20-day exponential moving averages), when viewed from a weekly perspective, oversold levels have not been reached (SPX chart below with weekly Bollinger Bands). Consequently, while a near-term countertrend rally may occur at any time, until the short-term pattern of lower peaks and lower troughs is broken (short-term downtrend) or buying intensity occurs (email me for definition or refer to previous reports), following any near-term rallies, don’t be surprised by further downside probing –2650.

S&P 500 Stocks Above 20-EMA Index.
S&P 500 Large Cap Index.


Day Hagan Market Update Webinar with Donald Hagan, CFA, June 12, 2019 @ 4:15 PM EST

Day Hagan Technical Analysis Webinar with Art Huprich, CMT, June 18, 2019 @ 4:15 PM EST

Art Huprich, CMT
Chief Market Technician
Day Hagan Asset Management

— Written intraday 06.03.2019. Chart sources: StockCharts.   

PDF Copy of Article: Day Hagan Tech Talk June 3, 2019 (PDF)

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