Day Hagan Tech Talk: Risk Like Fire

SUMMARY

The dip on Friday was not as wide or intense as it was earlier in the week, but it was concentrated – the beginning of a potential low? But unless there is a sustained rally due to current oversold conditions or high demand statistics emerge, please do not dismiss the Mini Q4 2018 scenario.

HARD WEEK FOR DOMESTIC SHARES

President Teddy Roosevelt once said:Risk is like fire: if controlled, it will help you. If not controlled, he will rise up and destroy you. “ We advise on risk management with internal price discrepancies occurred a few weeks ago… With the following statistics on performance compared to last week (Figure 1), I still feel it prudent to discuss my risk tolerance and how I manage it.

Figure 1: Weekly Performance Statistics (as of 03.12.21). | Apart from the statistics below, the NDR reports that as of 12/01/21, while SPX was 4% below the annual high, nearly 24% of S&P 500 stocks fell 20% or more. from the annual maximum.

Bottom line: Nearly 24% of stocks in the S&P 500 are in a bear market of their own, as measured by a pullback of 20% or more. In other words, a serious domestic stock market carnage has already occurred, despite limited price declines in most of the major domestic stock market indices.

Also, while CRB index highly dependent on energy, last week it fell by almost 2.7%

INTERNAL LOW AND INDEX LOW / LOWER

In many cases, as stock market indices / proxies attempt to establish an initial low or develop a bottom, the internal low of the price / intensity of sales occurs before the actual low / bottom of the index –please contact us if you would like to discuss why this is the case

Figure 2: New lows in 52 weeks. | Aside from the NASDAQ, which saw a lot of selling last Friday, new 52-week lows fell last Friday as stock market indices / proxies sold off and re-tested previous lows.

Last Friday, the NYSE FANG Index fell nearly 3.6%, the Small Cap proxy lost more than 2%, and the NASDAQ was down 1.9%, but the DJIA, which is a value / cyclical index, did not fall much, falling to 0. , 17%. Regardless, and in addition to the New Low charts shown above, NYSE, SPX, Mid-Cap, and Small Cap have a higher percentage of their respective 20- and 50-day simple or exponential moving averages did not set a new minimum – ask for a schedule. This confirms that last Friday’s decline was concentrated and not as broad or intense as what happened earlier in the week. Combined with an oversold condition (please refer to the McClellan Oscillator chart) and an intensifying bearish sentiment (sentiment becoming favorable rather than opposite), an inside low could be set or a bottom could be developing.

Bottom line: Beyond the need Credit spreadsthat were expanding (bearish) to narrow, refer to the Summary below to see what I think should happen next for some stability and normalcy (I know, I know, “what is normal,” you ask) to get back to the domestic stock market.

SANDMAN – LINES IN THE SUPPORT OF SAND

Sandman This is a comic book published by DC Comics. One of the “themes” Sandman it is a struggle for freedom from forces, both external and internal. “

In this report, the “Freedom Struggle” refers to the domestic stock market struggle for support that has so far taken place, with the exception of the high-tech NASDAQ. By “outside forces” is meant Wall Street, which has argued with the media about the new version of Covid and the effectiveness of vaccines in relation to it, as well as about a change in the thinking and policies of Fed Chairman Jerome Powell. “Inner Strength” refers to the weak action of the tape that has occurred over several weeks, as discussed above.

Figure 3: S&P 500 Daily Large Cap Index… | During the September-October decline, the 100-day moving average (blue line) represented the area from which the Bottom was developing. Although the background of the “external forces” has now changed, I would call it and the area between 4513 and 4491 support “Line in the sand”.

Figure 4: S&P 500 Large Cap Index 60 minutes… | One of the needs is to break the pattern of lower price peaks. For reference, use the levels given in the diagram –there is still work to be done

Figure 5: iShares Russell 2000 ETF (Small Cap Proxy). | Line in the Sand support levels are indicated by green lines and previous price lows shown on the chart. At the same time, resistance levels (areas of sellers’ pressure) are highlighted with red lines.

Figure 6: Dow Jones Industrial Average… | While the closest reaction low at 34,006 will be considered a line in the sand support, additional support levels are indicated by green lines and a rising 200-day moving average. Meanwhile, resistance levels (areas of selling pressure) are highlighted with red lines.

Figure 7: NYSE preliminary deviation lines – all issues and only ordinary shares… | While In my opinion, A / D line analysis is much more effective at identifying the tops of the stock market.I wanted to include this chart because there is another line in the sand support – the green lines.

As we approach the end of 2021, the Day Hagan Asset Management team would like to thank you for your interest in our research and investment strategies. If you have any feedback, please contact us and let us know how we can improve our research reports, investment strategy updates and online events to help your investment, trading and risk management discipline in 2022.


Art Hooprich, CMT®
Chief Marketing Officer
Day Hagan Asset Management

– Posted on 05/12/2021. Source of charts and tables: Stockcharts.com unless otherwise noted.

Disclosure: The data and analysis contained in this document is 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 will not be liable for any loss incurred by anyone who relies on information contained in any literature or marketing of Day Hagan Asset Management. materials. All opinions expressed in this document are subject to change without notice and you should always be updated and due diligence before investing. DHAM accounts managed by DHAM or its subsidiaries, or their respective shareholders, directors, officers and / or employees, may have long or short positions in the securities discussed in this document and may buy or sell such securities without prior notifications. The securities mentioned in this document may not be eligible for sale in some states or countries, or may be suitable for all types of investors; their value and the income they generate may fluctuate and / or be adversely affected by exchange rates, interest rates, or other factors.

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