February witnessed notable sector rotation in the equity markets, with the Consumer Staples, Real Estate, Energy, and Health Care sectors experiencing growth, while Consumer Discretionary, Information Technology, Industrials, and Communication Services faced declines. The month began amid disappointing macroeconomic indicators that dampened investor confidence, highlighted by a significant drop in the University of Michigan’s Consumer Sentiment Index.

Many finally became aware of the unwinding speculative stock market activity in the Index Movers, Quantum stocks, crypto, IPO proxy, and penny stocks that had run up on above-average volume.

The Catastrophic Stop model declined to 70.7% from 72.9% last week due to a relative strength measure calling stocks versus bonds turning negative. The model’s internal indicators remain bullish, though less so with this week’s update, and the external indicators are neutral.

Last week, I stated that I’d like new highs to see what selling arises. I also said we would soon know if any topside breakouts were false and full of hot air. We immediately got an answer to both scenarios.

The Day Hagan Catastrophic Stop model level is 72.9%, the same level as last week. The model’s internal indicators remain bullish, and the external indicators are neutral. We note that measures calling U.S. Stock/Bond relative strength and Short-term Trend are approaching potential sell signals, while MSCI Equity Market breadth and Emerging Market/High-Yield bond breadth remain positive.

I want equity market proxies to break topside and see 1) what selling pressure arises, if any, 2) if internal measuring tools (Advance-Decline figures, New Highs, sector participation, equal versus cap weight, etc.) confirm or diverge (again), and 3) sentiment readings. 

The Catastrophic Stop model held steady at 72.9%, the same level as last week. The model’s technical indicators are bullish, and the external indicators are neutral.

Last Friday, news of lower unemployment and rising hourly earnings heightened inflation expectations, while ongoing tariff concerns added to market volatility. As a result, equity market proxies pulled back, reflecting continued selling pressure around resistance levels.

The Catastrophic Stop model held steady at 72.9%, the same level as last week. On average, the model’s technical indicators remain bullish, and the external indicators are neutral.

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.

The Catastrophic Stop model combines time-tested, objective indicators designed to identify high-risk periods for the equity & equity-related fixed-income markets. The model improved in January & entered February with a fully invested allocation recommendation. If our models shift to bearish levels, we will reduce exposure to fixed-income sectors with high correlations to equities.

Between early December 2024 and early 2025, we highlighted a negative Advance-Decline Line non-confirmation and expected price volatility to continue. We still feel the same. Equity market price volatility will continue deeper into Q1, at a minimum.

The Catastrophic Stop model combines time-tested, objective indicators designed to identify high-risk periods for the equity market. The model (Figure 1) improved in January and entered February with a fully invested equity allocation recommendation. We will raise cash if our models shift to bearish levels (below 40% for two consecutive days).

The Catastrophic Stop model combines time-tested, objective indicators designed to identify high-risk periods for the equity market. The model (Figure 1) improved in January and entered February with a fully invested equity allocation recommendation. We will raise cash if our models shift to bearish levels (below 40% for two consecutive days).

The Catastrophic Stop model held steady at 72.9%, the same level as last week. On average, the model’s technical indicators remain bullish, and the external indicators are neutral.

Internal measuring tools have moved to be supportive, yet resistance stands, and a negative Advance-Decline Line condition remains. Meanwhile, the Catastrophic Stop Loss model and U.S. High Yield Index OAS-Credit Spreads support the S&P 500’s uptrend.

The Catastrophic Stop model increased to 72.9% from 65.9% last week. Internal measures (price-related indicators) are bullish, and External measures (indicators calling the operating environment) are neutral.

Stocks bounced sharply higher once support was tested and held, further supported by oversold conditions and relatively favorable inflation reports. Internal measuring tools moved sharply in the right direction. Broader participation and follow-through are now needed.

The Catastrophic Stop model increased slightly to 65.7% from 60.7% last week. Internal measures (price-related indicators) are bullish, and External measures (indicators calling the operating environment) are neutral.

Worries over fiscal discipline, immigration policies, the recent strong employment report, and several other issues drove the 10-year U.S. Treasury yield above 4.80%. When the Fed started lowering interest rates on 9.18.24, the 10-year yield stood at 3.70%. Who’s missing what?