Day Hagan Tech Talk: Critical week at your fingertips


By Art Huprich, CMT®, Chief Market Technician, Day Hagan Asset Management

SUMMARY

Last week’s band reflects a market that has stabilized, set a low for decimated growth stocks and is starting a short-term uptrend. It was last week the trough for growth and stock indices? We will only know afterwards.

MOMENTUM, WIDE PARTICIPATION

The Fed, Supply Chain Constraints, Commodities, Ukraine/Russia, Inflation and Omicron ba.2 are a veritable “wall of worry”, which anecdotally supports stocks. Either way, the action on tape last week was jaw-dropping in terms of momentum and broad participation/breakouts—bullish confirmation.

  • Momentum: Four straight days in which the S&P 500 (SPX) closed up at least 1% and the NASDAQ rebounded more than 8%, the best week for both indexes since November 20.

  • McClellan oscillator: Normally used to measure overbought (OB) and oversold (OS) conditions. However, the oscillator recently moved from a relatively OS state in early March to a very OB state last Friday. Since the low in late 2018, this type of reading has occurred seven times. Every time the SPX was higher – momentum. Friday was number eight. Please reach out for the chart.

  • Wide participation/pushes: According to Ned Davis Research (NDR), Friday’s rally pushed over 90% of SPX stocks above their 10-day MA and a Zweig push occurred (common stocks only). According to NDR, “although past performance is no guarantee of future results, surges in magnitude are among the most consistent indicators since the financial crisis.” Please reach out for the chart.

  • S&P500 completed a short-term bullish base-building pattern, surpassing a previous price peak and establishing a short-term uptrend. Figure 1.

  • To add credence to last week’s tape action, stock markets must record upward tracking this week – a critical week indeed.

[wce_code id=192]

I’m still of the view that stock markets will continue to experience day-to-day and week-to-week price volatility in both ways. As my friend Helene Meisler, a veteran analyst, reminds us,Nothing like the price to change the feeling.” Therefore, I believe extreme feelings will continue to drive price movement in the short term.

SUPPORT BELOW, RESISTANCE ABOVE

Short-term downtrend lines have been breached on the upside. However, there are many overhanging selling pressures (resistance). Working out the amount of existing overhanging selling pressure (resistance) is not a quick fix. It takes time and effort—volatility.

Figure 1: S&P 500 Large Cap Index. | The selling pressure (resistance) levels and underlying support levels are clearly outlined below. Please contact us for more details.

Day Hagan Tech Talk: Critical week at your fingertips

Figure 2: iShares Russell 2000 – Small Cap Proxy. | This table is getting very interesting. A serious short squeeze could occur under the right conditions – a high-volume breakout that draws skepticism. Price tags, red resistance lines, and green support lines represent resistance and support areas.

Day Hagan Tech Talk: Critical week at your fingertips

Figure 3: S&P 600 Small-Cap Forward Price-to-Earnings Ratio. | This chart is for those who favor small caps and fundamentals.

Day Hagan Tech Talk: Critical week at your fingertips

Figure 4: Semiconductor Index – SOX. | An old friend and former colleague (RIP Big Guy) thought the semis were a leading indicator for NASDAQ. While that may not be as true today as it was in his time, his statement still holds true. Let’s test his theory and see if the SOX can break out and take the NASDAQ with it. Please do not anticipate, but rather be reactive if the breakout occurs.

Day Hagan Tech Talk: Critical week at your fingertips

Figure 5: Average Dow Jones Utility – UTIL. | Is this chart a short-term benchmark for the fixed income market? Since it is right at resistance, with a huge hike in interest rates yesterday (hawkish comments from Fed Chairman Powell) after already seeing a strong move higher, I would say yes. A pullback here by UTIL can equate to a short-term pullback in interest rates and a tactical (short-term only) rally in the fixed income market. Ultimately, however, I think UTIL resolves higher.

Day Hagan Asset Management appreciates being a part of your business, whether through our research efforts or our investment strategies. Please let us know how we can help you further.

—Written on 2022-03-21. Chart source: Stockcharts.com, unless otherwise stated

PDF copy of this article: Day Hagan Tech Talk: Critical Week At Hand (pdf)


DISCLOSURE

The information on this website does not imply the provision of personalized investment advice and is not intended to give specific advice but is limited to the dissemination of general information on products and services. Information presented herein is subject to change without notice and should not be considered a solicitation to buy or sell securities. This information may not be suitable for all investors. Consider your investment objectives, risk factors, and fees and expenses carefully before investing. Remember that past performance may not be indicative of future results. Information relating to Day Hagan Asset Management, including fees and services, can be found in our ADV Part 2 form, a copy of which can be found by clicking here. The Donald L. Hagan CRS form can be found by clicking here.

Investment advisory services offered by Donald L. Hagan, LLC, an SEC-registered investment advisory firm.

Learn more at ETFtrends.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


nasdaq

Not all news on the site expresses the point of view of the site, but we transmit this news automatically and translate it through programmatic technology on the site and not from a human editor.
Back to top button