Since the beginning of June, people are playing “catch up” in the domestic equity market by buying relative strength laggards (economically sensitive, non-growth, regional banks, small/mid-caps, energy) and taking profits and/or reducing buying the former relative strength leaders (large and mega-cap growth).

The NDR Catastrophic Sell Stop model combines time-tested, objective indicators designed to identify high-risk periods for the equity market. The model deteriorated from last month but entered June with a fully invested equity allocation recommendation.

The risk management model (chart at right) seeks to reduce exposure to fixed income sectors most sensitive to equity drawdowns (U.S. High Yield, Emerging Markets, U.S. Investment Grade, and Floating Rate Notes) during periods of market stress.

The NDR Catastrophic Sell Stop model combines time-tested, objective indicators designed to identify high risk periods for the equity market. The model (chart at right) deteriorated from last month but entered June with a fully invested equity allocation recommendation.

It was helpful getting on the right side of our benchmark, the S&P 500 (SPX), in mid-October/November 2022, noticing the relative strength shift to Growth in late January, the start of price stability and basing by the Bank complex and the recent uptick by Small Caps.

DH Smart Value Portfolio: YTD slightly negative but outperformed benchmark with lower volatility. FANMAG stocks mask underlying weakness. Value stocks poised for strength. Holding Meta, Alphabet. Mosaic, Nutrien underperformed due to restocking concerns. Macro focus on Fed, economic trends, inflation, and geopolitics. Sector weightings and valuations are favorable.

The Day Hagan/Ned Davis Research Smart Sector® for Global Balanced Portfolios was recorded on May 29, 2023.

As with the negative Advance-Decline Line divergence from late 2021, A/D Line divergences can last a while before being felt. While most technology-related proxies (SPX, NDX, XLK/SMH, “FANG+,” etc.) are reflecting Mad Magazine’s Alfred E. Neuman slogan, “What, me worry?” A/D Lines are again negatively diverging from underlying equity market proxies.

The Day Hagan Technical Analysis was recorded on May 23, 2023. Art Huprich, CMT, shares his monthly chart jamboree. He discusses Equity Markets, the regional bank crisis, the debt ceiling debate, and other financial market topics.

KISS (Keep It Simple, Sam): A push below 4098 would increase the odds of a retest of 4050 to 4045 support, which, if broken, would signal a bearish trend reversal. Alternatively, a push above resistance between 4190 and 4218 would suggest a continuation of the move higher since mid-March.

Having absorbed and contained some issues last week (Fed meeting, AAPL earnings, and April jobs report), on tap this week is the CPI (Wednesday) and PPI (Thursday). Day Hagan’s view is that inflation has peaked.

DH Smart Value Portfolio: Positive YTD performance, higher returns with lower volatility. Focus on quality, profitability, and valuation. Mixed macro environment, balancing headwinds and positives. Emphasis on value-oriented stocks amid potential debt ceiling concerns. Sector weightings and valuation metrics remain favorable.

The risk management model (chart right) seeks to reduce exposure to fixed-income sectors most sensitive to equity drawdowns. The risk management model improved from last month and entered May recommending full model exposure to U.S. Treasury, U.S. Mortgage-Backed Securities, U.S. Corporates, International Investment Grade Bonds, and U.S. Short-Term Bonds.

The NDR Catastrophic Sell Stop model combines time-tested, objective indicators designed to identify high-risk periods for the equity market. The model (chart at right) improved from last month and entered May with a fully invested equity allocation recommendation.

The NDR Catastrophic Sell Stop model combines time-tested, objective indicators designed to identify high risk periods for the equity market. The model (chart at right) improved from last month and entered May with a fully invested equity allocation recommendation.

Much of the focus this week will be on what I call the noise: the Fed’s focus on inflation (May 3 interest rate announcement), additional economic reports capped off Friday by the April jobs report, and AAPL’s EPS report Thursday. Enjoy the whine—increased volatility in equities and interest rates.

The Ned Davis Research Catastrophic Stop Loss Model, part of our Smart Sector Global Balance Portfolio Strategy, remains, since November 2022, fully invested versus its S&P 500 benchmark. If our indicators reverse and suggest otherwise, we will follow.

The Day Hagan Technical Analysis was recorded on April 19, 2023. Art Huprich, CMT, shares his monthly chart jamboree. He discusses Global Recession Probability, Credit Spreads, Investment Grade Banking, Domestic Equity Market, and other financial market topics.

While I’m not a fan of the entire Commodity complex, there are areas of improving and/or bullish absolute and/or relative chart configurations. This includes Silver and Gold.

The Catastrophic Stop model deteriorated in March but remains with a fully invested Core and Explore allocation entering April. The Core model overweighted the U.K., Germany, and Switzerland while underweighting Canada and China. The Explore model favored the Philippines, Thailand, Netherlands, New Zealand, Spain, and Mexico. The models combine macro, fundamental, technical, and sentiment indicators to determine opportunities and identify risks in an objective, weight-of-the-evidence approach.