Day Hagan Tech Talk: An Early Peek Into 2024
A downloadable PDF copy of the Article: Day Hagan Tech Talk: An Early Peek Into 2024 (pdf)
Summary
Following this week’s macro events (CPI earlier today, PPI & FOMC policy and Q&A Wednesday, Retail Sales and global Central Bank policy Thursday) and year-end tax loss harvesting, equity market trading is likely to slow into the holidays and year-end. Let’s consider a possible 2024 scenario.
Identifying a Potential Framework
Year-end 2024 equity market projections have been coming out for weeks. These guesstimates are, in my opinion, an exercise in ego. In my experience, far too many micro and macro factors come out as a year progresses, impacting investor fear and greed. These factors dictate many buy and sell decisions on a daily, weekly, and monthly basis. This is why Day Hagan uses an unemotional, objective investment process coupled with a risk management component in our Smart Sector strategies.
That said, I find Figures 1 and 2 interesting conversation starters. Though they are not part of the NDR Catastrophic Stop Loss Model, they may aid investors in identifying a potential framework for 2024. NDR’s Cycle Composites for both 2022 and 2023 were extremely accurate, in my opinion.
Figure 1: S&P 500 Cycle Composite for 2024 – trend is more important than level. | This implies a choppy first half but a better second half. NDR states, “This is consistent with our macro expectations as slowing growth, fiscal tightening, and election uncertainty are expected to give way to a more constructive second half… but as always, if and when we reduce our… equity allocation will be based on our models.”
Note: The NDR Cycle Composite is a combination of three historical price patterns: the one-year cycle, the four-year cycle (election years for 2024), and the ten-year cycle (years ending in four).
Figure 2: Dow Industrials – Presidential Election Year Cycle II. | On average, the stock market bottoms during May of election years (thick black line), but the average can be deceiving. Often, rallies begin once election uncertainty lifts. NDR notes, “Given the likely close Biden/Trump rematch, election uncertainty could overhang the market after May…. Returns tend to be weaker when the incumbent party loses. Whether the market is weak because of uncertainty over a new administration, or a poor economy hurts both the incumbent and the stock market is open to debate, but a hard landing would likely damage Biden’s bid to stay in office as well as the stock market’s bid to stay in a bull market.”
Note: From a shorter-term viewpoint, the following areas of support exist: 178 to 176.91, 176 to 174.22.
Figure 3: S&P 500 – 2-year chart. | While many sentiment indicators continue to exhibit “exuberant” readings (too much bullishness), the internal composite of the NDR Catastrophic Stop Loss model (technical component) remains supportive of equities. The SPX is emerging up from its multi-week consolidation range. Note: The sentiment readings don’t represent a signal (sell) but a condition (many Wall Street participants have already bought). The sell signal, based on these sentiment readings, won’t occur until they reverse and decline in earnest.
Please let me know if you would like to schedule a call to go over the process and discipline underpinning our Smart Sector with Catastrophic Stop, Smart Sector International, and/or Smart Sector Fixed Income strategies. The disclosures and Fact Sheet information can be found here: https://dhfunds.com/literature.
Day Hagan Asset Management appreciates being part of your business, either through our research efforts or investment strategies. Please let us know how we can further support you.
Art Huprich, CMT®
Chief Market Technician
Day Hagan Asset Management
—Written 12.10-11.2023. Chart source: Stockcharts.com unless otherwise noted.
Future Online Events
Disclosure: The data and analysis contained herein are 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, shall not have any liability for any loss sustained by anyone who has relied on the information contained in any Day Hagan Asset Management literature or marketing materials. All opinions expressed herein are subject to change without notice, and you should always obtain current information and perform due diligence before investing. DHAM accounts that DHAM or its affiliated companies manage, or their respective shareholders, directors, officers and/or employees, may have long or short positions in the securities discussed herein and may purchase or sell such securities without notice. The securities mentioned in this document may not be eligible for sale in some states or countries, nor be suitable for all types of investors; their value and income they produce may fluctuate and/or be adversely affected by exchange rates, interest rates or other factors.
Investment advisory services offered through Donald L. Hagan, LLC, a SEC registered investment advisory firm. Accounts held at Raymond James and Associates, Inc. (member NYSE, SIPC) and Charles Schwab & Co., Inc. (member FINRA, SIPC). Day Hagan Asset Management is a dba of Donald L. Hagan, LLC.