The Catastrophic Stop model level declined to 51.43% from 56.43% last week. The decline resulted from the “High Yield and Emerging Market Bond Factor” reversing back to neutral from bullish (reversal occurred March 26). Technical measures calling U.S. Stock/Bond Relative Strength, Short-term Trend, Intermediate-term Trend, and High Yield OAS spreads are bearish.

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The Catastrophic Stop model increased to 56.43% from 51.43% last week due to the “High Yield and Emerging Market Bond Factor” shifting from neutral to bullish. In other words, the fixed-income markets are holding up well. We’d also note that global equity breadth is constructive, and volume-adjusted demand continues to outpace supply.

The Catastrophic Stop model declined to 51.43% from 63.57% last week. The model’s technical indicators are now low neutral on balance due to the intermediate-term trend factor turning negative, joining the short-term trend and stock/bond relative strength factors discussed last week. Neutral readings remain in place for our breadth thrust and oversold mean reversion factors.

Following the domestic equity market’s heart attack-inducing decline, it needs a slow, methodical rehab to repair the chart damage. Friday started the process, but more is needed.

Although we set our clocks ahead over the weekend, stock prices fell back as macro risk and political headline fatigue weighs heavily on Wall Street’s psyche. An oversold rally is due (Figure 1). If it doesn’t occur soon, it will be bearish.

The Catastrophic Stop model declined to 63.57% from 70.71% last week. The model’s technical indicators are now neutral on balance due to the short-term trend factor turning negative, joining the stock/bond relative strength factor. Neutral readings are in place for our breadth thrust and oversold mean reversion factors.

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.

In February 2025, global fixed-income markets fared well, though they faced considerable turbulence fueled by geopolitical tensions, shifts in monetary policy, and changing investor sentiment. A key incident contributing to this uncertainty was the contentious meeting between U.S. President Donald Trump and Ukrainian President Volodymyr Zelensky on February 28.

International equities outperformed the U.S. in February, with Europe leading the way. Spain, the U.K., Germany, Hong Kong, and China gained significant ground while the U.S., Taiwan, Australia, Japan, and India lagged.

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.