Day Hagan Tech Talk: Who’s in the Pool?
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Summary
Advance-Decline Lines are supportive. New Highs recently improved. Yet sentiment is ebullient (the Bulls are all in the pool—a condition, not yet a signal). Equity market proxies are short-term overbought (a condition), and some equity proxies are at or near resistance lines.
Giddy
“The Bulls are all in the pool” refers to the current period in which many sentiment indicators are all skewed bullishly—giddiness abounds on Wall Street in the short term. This would include the DH Daily Market Sentiment Composite, Inverse ETF volume, put-call ratios, NAAIM, newsletter writers (Investors Intelligence), AAII, etc. Since these readings are viewed as contrarian indicators, they suggest a period of digestion or backing and filling, with a pullback potentially imminent.
Last week we spent a good deal of time highlighting some key relative strength charts important to monitor as we enter the second half of 2025. This week, I’m including a few price charts worthy of monitoring primarily because of their current position relative to overhanging selling pressure (resistance)—Figures 1, 2, and 3.
Figure 1: S&P 500. | Red lines depict resistance (selling pressure); green and blue depict support.
Figure 2: The Jones. | Please see the verbiage inside each chart. Additionally, red lines represent resistance while green lines indicate support.
Figure 3: Small Cap proxy with rising 50-day MA. | I think a relative strength breakout will eventually occur—top frame. Red lines represent resistance while green lines indicate support.
Bottom Line: Optimistic sentiment continues to support equity exposure. However, in many cases, once these sentiment indicators reach extreme levels, like now, it isn’t until they reverse direction and everyone “exits the pool” that signs of fading upside demand should be taken seriously in the short term. In other words, equities are more vulnerable to negative news or tweets, which may lead to contained but abrupt periods of short-term downside price volatility. And if our models and indicators shift toward a period of higher risk, which they haven’t yet done, we’ll adjust our portfolios accordingly.
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Art Huprich, CMT®
Chief Market Technician
Day Hagan Asset Management
—Written 7.7-8.25. Chart source: Stockcharts.com unless otherwise noted.
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