Day Hagan Catastrophic Stop Update March 10, 2026
The Day Hagan Catastrophic Stop model has declined to 59.09% due to an equity breadth indicator moving to a sell signal. The overall model remains above the key 45% threshold, indicating that investors should maintain their benchmark equity exposure.
Figure 1: The Catastrophic Stop model remains constructive for equities.
Breadth indicators (e.g., advance–decline line, % of stocks above moving averages) measure how many stocks participate in a move, not just the index price. They often turn early because participation expands or contracts before the index responds—large-cap stocks can temporarily mask underlying strength or weakness. Broad improvement signals institutional accumulation and a healthier market structure, increasing the odds that a trend persists, whereas weakening breadth signals fading support. Note: A drop below 30% followed by a rebound above would trigger a new buy signal.
Figure 2: Waning breadth is a yellow flag. Note that levels below 7% have often identified extreme oversold conditions.
Most indicators in the Catastrophic Stop model are at or near signal thresholds. If the market continues to weaken alongside rising disruptions—widening credit spreads, deteriorating breadth, reaccelerating inflation, slowing growth, and higher rates—the model is positioned to shift to a risk-off stance. On sentiment, the Daily Market Sentiment Composite remains neutral but is approaching levels historically associated with extreme pessimism.
Figure 3: Sentiment is nearing levels of extreme pessimism.
Market performance since the onset of the Iran conflict has been somewhat remarkable, given the backdrop of significant macro and geopolitical risks—including energy shocks, elevated valuations, AI-related concerns, private credit vulnerabilities, tariffs, a still-tight labor market, moderating economic activity, the Russia–Ukraine war, and the approaching U.S. midterm elections. Despite these headwinds, equities have shown notable resilience even amid sharp swings in oil prices and geopolitical uncertainty.
Figure 4: The market holding up in the face of significant adversity is constructive.
Fixed-income investors also appear largely nonplused. Investment-grade corporate OAS (credit spreads) have remained near the low end of their range (looking back to 2007). In our view, credit markets often detect emerging financial stress earlier than equities, making the current stability in spreads notable.
Figure 5: Credit spreads are still relatively tight among investment-grade corporates.
While credit spreads are behaving, equity, bond, and energy volatility measures are increasing. For example, as of last Friday, the CBOE Crude Oil Volatility Index (OVX) jumped significantly. Typically, the OVX spikes when oil prices crash, much like the VIX during equity selloffs. Seeing oil prices and oil volatility surge together is rare and signals a genuine supply shock, not a demand-driven rally.
Since U.S.–Israeli strikes on Iran on February 28, crude prices have jumped as Iran effectively halted traffic through the Strait of Hormuz, putting about 20% of global oil supply at risk. The disruption has lasted nine days—more than double the share disrupted during the 1956–57 Suez Crisis. Iraq, the UAE, and Kuwait have also curtailed production as tankers face bottlenecks and barrels accumulate without export routes.
If the strait remains closed, production losses could approach 6 million barrels per day, potentially pushing oil toward $120–140. Yet longer-dated futures for 2027–28 remain in the high $60s, reflecting expectations that today’s shock may prove temporary.
That divergence is the key: options markets are pricing extreme two-way outcomes. Oil could spike toward $140 if the disruption persists or fall back toward $60 if flows normalize. This fat-tailed, bimodal distribution is what drives implied volatility to extremes even as front-month prices surge.
Figure 6: If the Iran conflict lasts less than a month or so, we see a resumption of the primary equity trend. Longer than that, and it gets dicey. One main reason: Many international regions import the majority of their energy needs. Japan, South Korea, India, and China account for 75% of oil and 59% of LNG flows through the strait.
The chart below, first featured last week, illustrates a historical perspective. It shows equity and fixed income behavior during the 12-day war between Israel and Iran, which took place from June 13, 2025, to June 24, 2025. Israeli forces launched major strikes on Iranian military and nuclear sites, Iran retaliated with missiles and drones, and a ceasefire was reached around June 24, 2025, under U.S.-brokered terms.
As you can see, equities initially moved lower while Treasury yields moved higher. However, within 8 days or so, they began to reverse. U.S. equities ended higher, international equities ended less than 2% lower, and yields ended up 6.4 basis points lower. Similar?
Figure 7: The lessons from last year’s “12-day War” may prove instructive. Our constructive views hinge on the hostilities ending relatively quickly.
Market equity positioning remains neutral.
Figure 8: Based on the 10% Volatility Target Equity Allocation, equity positioning is neutral.
Earnings growth expectations continue to advance. We view this as one of the most important foundations for the market’s primary uptrend.
Figure 9: As earnings go, so go the markets.
Our 10-year Treasury Fair Value model indicates a level of 4.05%, indicating potentially modestly lower rates ahead.
Figure 10: Rates not expected to spike higher.
U.S. Economic Releases:
There’s going to be a lot of data this week.
CPI tomorrow. While there will be fits and starts, we view inflation as generally heading in the right direction.
10-year bond auction tomorrow. Watching foreign participation closely.
Unemployment claims on Thursday. Low hire, low fire outlook still in play – even with last week’s jobs report. Also 30-year bond auction.
PCE – the Fed’s preferred inflation measure. We are looking to see if market participants want to hold exposure over the weekend. If they do, it will signal to us that investors are becoming more comfortable with the geopolitical environment.
Figure 11: Economic release calendar. Source: Forexfactory.com
Bottom Line: The Day Hagan Catastrophic Stop model declined to 59.09% after an equity breadth indicator moved to a sell signal, but it remains above the 45% risk threshold, indicating investors should maintain benchmark equity exposure.
Breadth indicators measure how many stocks participate in a move and often turn early because large-cap indices can mask underlying strength or weakness. Recent deterioration is a yellow flag, though a drop below 30% followed by a rebound would trigger a new buy signal.
Most model inputs now sit near key thresholds. Continued weakness—alongside widening credit spreads, deteriorating breadth, reaccelerating inflation, slower growth, or higher rates—could push the model toward a risk-off stance. Sentiment remains neutral but is approaching extreme pessimism.
Equity resilience has been notable despite geopolitical and macro risks. Credit markets remain calm, with investment-grade spreads near the low end of their range since 2007. Oil volatility has surged amid the Iran conflict, reflecting risks of supply disruptions and unusually wide ranges in prices and growth outcomes.
Conclusion: For now, the primary equity trend remains intact, supported by stable credit markets, advancing earnings expectations, and only modest pressure from rates. However, the margin for error is narrowing. If geopolitical tensions persist or internal market conditions deteriorate further, the model is positioned to shift defensively. Investors should remain disciplined, maintaining exposure while closely monitoring breadth, credit spreads, and volatility to confirm either renewed strength or a more durable risk-off turn.
For more details on each sector and current model levels, please visit our research page at https://dayhagan.com/research.
This strategy uses measures of price, valuation, economic trends, liquidity, and market sentiment to make objective, rational, and emotion-free decisions about how much capital to place at risk and where to allocate it.
If you would like to discuss any of the above or our approach to investing in more detail, please don’t hesitate to schedule a call or webinar. Please call Tyler Hagan at 941-330-1702 to arrange a convenient time.
Sincerely,
Donald L. Hagan, CFA
Chief Investment Strategist, Partner, Co-Founder
Sources:
https://www.eia.gov/todayinenergy/detail.php?id=65504
https://www.eia.gov/international/analysis/special-topics/World_Oil_Transit_Chokepoints
https://www.eia.gov/todayinenergy/detail.php?id=65504
https://www.cmegroup.com/markets/energy/crude-oil/light-sweet-crude.quotes.html
This material is for educational purposes only. Further distribution is prohibited without prior permission. Please see the information on Disclosures here: https://dhfunds.com/literature. Charts with models and return information use indices for performance testing to extend the model histories, and they should be considered hypothetical. All Rights Reserved. © Copyright 2025 Day Hagan Asset Management. Data sources: Day Hagan Asset Management, 3Fourteen Research, J.P. Morgan, Goldman Sachs, Barchart, StreetStats, Atlanta Fed, St. Louis Fed, Koyfin, Yardeni, MarketEar, S&P Global, SPDR, FactSet.
Disclosures
S&P 500 Index—An unmanaged composite of 500 large-cap companies, this index is widely used by professional investors as a performance benchmark for large-cap stocks.
S&P 500 Total Return Index – An unmanaged composite of 500 large capitalization companies. Professional investors widely use this index as a performance benchmark for large-cap stocks. This index assumes reinvestment of dividends.
Sentiment – Market sentiment is the prevailing attitude of investors toward a company, a sector, or the financial market.
CBOE Volatility Index (VIX) – A real-time index that represents the market’s expectations for the relative strength of near-term price changes of the S&P 500 Index (SPX). Because it is derived from SPX index options with near-term expiration dates, it produces a 30-day forward volatility projection. Volatility, or how quickly prices change, is often seen as a way to gauge market sentiment, particularly the degree of fear among market participants.
OBOS Indicators—The overbought/Oversold (OBOS) index relates the difference between today’s closing price and the period’s low closing price to the trade margin of the given period.
NFIB – The National Federation of Independent Business advocates for America’s small and independent business owners.
Purchasing Manager Indexes (PMIs) – Purchasing Managers’ Indexes are survey-based economic indicators designed to provide timely insight into business conditions.
FOMC Meeting – The FOMC (Federal Open Market Committee) holds eight regularly scheduled meetings per year. At these meetings, the Committee reviews economic and financial conditions, determines the appropriate stance of monetary policy, and assesses the risks to its long-term goals of price stability and sustainable economic growth.
Consumer Price Index (CPI) – Measures the monthly change in prices paid by U.S. consumers. The Bureau of Labor Statistics (BLS) calculates the CPI as a weighted average of prices for a basket of goods and services representative of aggregate U.S. consumer spending.
Disclosure: The information contained herein is provided for informational purposes only and should not be construed as investment advice or a recommendation to buy or sell any security. The securities, instruments, or strategies described may not be suitable for all investors, and their value and income may fluctuate. Past performance is not indicative of future results, and there is no guarantee that any investment strategy will achieve its objectives, generate profits, or avoid losses.
This material is intended to provide general market commentary and should not be relied upon as individualized investment advice. Investors should consult with their financial professional before making any investment decisions based on this information.
Data and analysis are provided “as is” without warranty of any kind, either express or implied. Day Hagan Asset Management, its affiliates, employees, or third-party data providers shall not be liable for any loss sustained by any person relying on this information. All opinions and views expressed are subject to change without notice and may differ from those of other investment professionals within Day Hagan Asset Management or Ashton Thomas Private Wealth, LLC.
Accounts managed by Day Hagan Asset Management or its affiliates may hold positions in the securities discussed and may trade such securities without notice.
Day Hagan Asset Management is a division of and doing business as (DBA) Ashton Thomas Private Wealth, LLC, an SEC-registered investment adviser. Registration with the SEC does not imply a certain level of skill or training.
There is no guarantee that any investment strategy will achieve its objectives, generate dividends, or avoid losses.
For more information, please contact us at:
Day Hagan Asset Management
1000 S. Tamiami Trail, Sarasota, FL 34236
Toll-Free: (800) 594-7930
Office Phone: (941) 330-1702
Websites: https://dayhagan.com or https://dhfunds.com
© 2026 Day Hagan Asset Management