Day Hagan Tech Talk: Short-Term Headwinds Blowing
A downloadable PDF copy of the Article: Day Hagan Tech Talk: Short-Term Headwinds Blowing (pdf)
Summary
Last week, I discussed short-term headwinds for equities, which are now evident in several factors: overbought conditions, fading systematic flows, all-in CTA positioning, corporate buybacks in a dry spell, and seasonal issues for equities and the Volatility Index (VIX).
Trend in Force Until Proven Otherwise
Despite the short-term headwinds discussed during last week’s Chart Jamboree and referenced above, along with the need to work off some excesses, our longer-term indicators continue to support a positive outlook for the equity market. We don’t expect an extended decline, but if our models and indicators shift more negatively, we will promptly reduce risk.
Within the context outlined above, we must monitor for a potential short-term reversal pattern, specifically a Double Top Reversal pattern. This pattern features two similar price peaks separated by a price trough (support). The pattern is completed when the support is broken. It typically marks a shift from an uptrend to a downtrend (price correction) or a sideways trend (time correction). Figure 1 is an example of a potential Double Top Reversal. Until support is broken, a reversal cannot be confirmed.
Figure 1: NASDAQ and rising 50-day MA and 200-day MA. | Don’t anticipate a breakdown. Wait for support to be broken with an expansion of volume.
Also, depending on your risk tolerance, you can apply a price or time filter to differentiate between valid and false support breaks. A price filter could require as much as a 3% support break before it is validated. A time filter might require the support break to be held for three days, or until the end of the trading week, before it is considered valid.
Finally, the short-term pattern completing this doesn’t necessarily call for investors to exit positions, but it does suggest implementing a strategy that incorporates risk management parameters, such as Day Hagan Smart Sector strategies and Day Hagan Smart Buffer strategy.
Note #1: NVDA’s chart configuration resembles that of NASDAQ shown in Figure 1. Please know that the price trough (support) between the two price peaks is between $169 and $167. A decisive close below that area will complete the reversal pattern and imply further downside probing.
Note #2: The employment print on Friday (9/5/25) and the September 11 CPI print are the lynchpins, and markets may be volatile going into those reports. J.P. Morgan thinks “the September 11 CPI is more critical as the Fed has moved from ‘balanced risks’ to target the labor market, so a hotter CPI print when combined with a stronger than expected NFP (non-farm payroll) print is the most probabilistic (likely) setup that would push the Fed into a pause.”
The Day Hagan Smart Sector Strategies incorporate built-in risk management parameters relating to sector allocation and equity-versus-cash allocation. Please let me know if you would like to schedule a call to discuss the process and discipline underpinning our Smart Sector with Catastrophic Stop, Smart Sector International, and Smart Sector Fixed Income strategies. Disclosures and Fact Sheets 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 09.01-02.25. Chart source: Stockcharts.com unless otherwise noted.
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.