The price trend of the “Technology-weighted” S&P 500 continues higher (Figure 3). Simultaneously, several breadth measures within the Technology sector have deteriorated, and I have already noted and likely over-discussed the internal deterioration beneath the broader domestic equity market.

“Yet” can be defined as “something has not happened up to the present time, although it may.”

The Portfolio continues to invest in companies producing excess returns through positive economic profitability, supported by solid balance sheets, significant cash generation, & trading w/ considerable margins of safety (valuation). Using our consistent & differentiated investment approach, the Portfolio is focused on outperformance, seeking higher total returns w/ lower volatility.

The Catastrophic Stop model combines time-tested, objective indicators designed to identify high-risk periods for the equity market. The model increased during May and entered June with a fully invested equity allocation recommendation.

The Catastrophic Stop model combines time-tested, objective indicators designed to identify high-risk periods for the equity market. The model improved during the month and entered June with a fully invested equity allocation recommendation.

The risk management model seeks to reduce exposure to fixed-income sectors most sensitive to equity drawdowns. The model improved during the month and entered June, recommending full exposure.

The domestic equity market has experienced a fair amount of volatility over past few months, including 2 large, short-term intraday reversals. Considering uptrend by equity indices affected by the “Growth Index Movers” & the favorable position of the CSLM, many domestic equity market indices remain confined to large trading range patterns, staying a bit longer than desired & frustrating many.

While volume expanded last Thursday, it didn’t come close to exceeding its 50-day average as it did when the key reversal occurred in April. Therefore, before labeling last Thursday’s intraday high of 5341.88 as a short-term top (it is now a resistance point), more evidence is needed.

This presentation discusses the current financial market trends, the Catastrophic Stop Model, new highs, broader indices, Global Equity Supply, Sector Allocations, Global Markets, Seasonality and Sentiment, U.S. Dollar, and more. Financial advisors are encouraged to watch this presentation replay for a comprehensive understanding of the market trends and indicators.

The domestic equity market has sloshed back and forth over the past few months, confined to a multi-month trading range. Nonetheless, some Advance-Decline lines have reached new highs and new 52-Week Highs are slowly expanding, supporting equities from a primary-trend perspective.

Equity markets can trend higher (higher price troughs and higher price peaks), lower (lower price peaks and lower price troughs), or sideways (rangebound). With the NYSE Advance-Decline Line (all issues) having just closed at a new high and the NDR Catastrophic Stop Loss model still positive, in mid-March we discussed a “Big Cap hesitation.”

Entering May, the non-U.S. equity Core model overweighted China, France, and Germany. Japan, the U.K., Canada, Switzerland, and Australia were below benchmark weighting. The Explore model favored Israel, Mexico, Malaysia, Netherlands, and Sweden.

Entering May, the fixed income allocation strategy’s positioning is overweight Long-term Treasurys, U.S. High Yield, and International Investment Grade. U.S. Investment Grade Corporates are neutral. Floating Rate Notes, Emerging Market Bond, TIPS, and Mortgage-Backed Securities are underweighted relative to the benchmark.

The sector model maintained mixed leadership this month. Entering May, Financials, Industrials, Consumer Staples, and Utilities are above benchmark weight. Energy, Real Estate, and Information Technology are neutral. Materials, Consumer Discretionary, Health Care, and Communication Services are below benchmark weight.

The DH Smart Value Portfolio continues to invest in companies producing excess returns through positive economic profitability, supported by solid balance sheets (quality), significant cash generation (profitability), and trading with considerable margins of safety (valuation). We believe these factors will continue to provide rational opportunities for the foreseeable future

Following an oversold condition and some “stealth price stability” in areas other than Technology/Growth (discussed last week), the “Index Movers” bounced higher last week. Consequently, the S&P 500 has retraced approximately 50% of the March-April decline and is now amid various pockets of overhanging selling pressure—resistance.

Day Hagan Market Update, hosted by Donald Hagan, CFA, was recorded on April 24, 2024. Don discusses a variety of financial market-related topics, including the driving forces influencing the global financial markets, the U.S. economy, economic growth vs inflation, Equity Sectors, tax policy, Fed rate cuts, Smart Sector with Catastrophic Stop Update, International markets, Fixed Income, and more.

Late last week, the “Index Movers” were sold and consequently the big cap equity indices recorded a significant decline. Meanwhile, other equity market areas attempted to outperform, showing that there was some price stability under the surface. Proxies for utilities, staples, financials, health care, and DJIA were up for the week. Was that it? Is the selling done/close to being done?

Prior to last week’s decline and as volatility picked up in both directions, domestic equity market indices had generally traded sideways for the better part of the past four to six weeks (hesitation). With last week’s sell-off, however, either uptrend lines were violated and not decisively recaptured and/or previous reaction low support levels were broken.

Wall Street tried to “Break on Through (To the Other Side)”—as The Doors might put it—the often-discussed upward trending support lines. With only one exception, however, it was not to be. At least not yet. From a short-term risk management perspective and considering last Friday’s relatively low-quality rally (NYSE Advancing Issues only equated to 57% of Total NYSE Active Symbols).