Day Hagan/NDR Smart Sector® with Catastrophic Stop Strategy July 2022 Update

The Day Hagan/Ned Davis Research Smart Sector® with Catastrophic Stop strategy entered this month recommending a 50% cash allocation. The NDR Catastrophic Stop model is based on the combination of two proprietary composites: 1) the Internal Composite (technical and price-related indicators) and 2) the External Composite (fundamental, economic, interest rate, and behavioral/sentiment indicators). Each composite is one-half of the overall score.

This month’s allocation to U.S. equities is overweight Energy, Health Care, Materials, Consumer Staples, and Information Technology. The model is underweight Industrials, Financials, Consumer Discretionary, and Communication Services. The sector allocations are determined using NDR’s Sector Model, where each sector has sector-specific, weight-of-the-evidence composites of fundamental, economic, technical, and behavioral indicators to determine the sector’s probability of outperforming the S&P 500.

Click the link below to read more about the strategy’s positioning.

Full strategy commentary: NDRSASDH202207061

Visit the Day Hagan research page for access to additional commentary and webcasts.

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It’s possible to read too much into things. Consider it a flaw in our nature. But when we are told the “Worst of market sell-off might be over but hold on tight”, we can’t help but wonder about the hedged language. After all, if Goldman sees recent price action as prompted by a “giant global margin call”, surely the sell-off is an opportunity? Apparently not, as the GS note in question suggested that the flows they have seen were not consistent with “a ton of selling”. Is this diagnostically useful, and if so, in what way? If forced to offer an opinion (and we are), we would agree with GS that volumes have certainly not been indicative of capitulation. In fact, recent volatility might be better thought of as evidence of preternaturally low levels of liquidity. That in itself begs the question of why liquidity is so poor. August doldrums, or evidence of a Potemkin market? Read more →

NDR Dynamic Allocation Strategy July 2023 Update