A ZBT buy signal update

Mid-week market update: Today's market action has a constructive quality to it. The S&P 500 managed to stage an upside breakout through 5500 resistance and fill the price gap just above that level. The latest development saw the index pulled back to succesfully test the 5500 resistance turned support 

 

 

 

It's normal to see the market consolidate its gains after a ZBT. Here's an update.

The full post can be found here.

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.     

4 reasons to be cautious about the ZBT buy signal

Preface: Explaining our market timing models 

We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can be found here.

  

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the email alerts is updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below.

 

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
• Trend Model signal: Bearish (Last changed from “neutral” on 11-Apr-2025)*
• Trading model: Neutral (Last changed from “bullish” on 14-Apr-2025)*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent and on BlueSky at @humblestudent.bsky.social. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of those email alerts is shown here.

Subscribers can access the latest signal in real time here.

A ZBT Buy Signal

I have recently seen a number of buy signals triggered with strong historical long-term returns. The latest is the Zweig Breadth Thrust. The technique was first detailed in Marty Zweig’s book, Winning on Wall Street, first published in 1986. It’s a rare signal that was triggered only eight times since the book’s publication. 

The signal required the market to exhibit strong price momentum. The Zweig Breadth Thrust Indicator needed to recover from an oversold to overbought condition within 10 trading days. The signal has had a 100% positivity rate on a 6- and 12-month horizon. The market fizzled over short-term horizons on three instances when the Fed was raising rates, which is not the backdrop today. That said, Tom McClellan published a study of ZBT signals going back to the 1920s and found that the results ended to be hit-and-miss.

The ZBT buy signal triggered late last week. Notwithstanding the stellar historical record of this indicator, I am struggling with the long-term equity bull case and I have four reasons to be cautious.

The full post can be found here.

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.     

An American Emerging Market crisis?

Something unusual happened recently. During risk-off episodes, U.S. economic pain has been cushioned by falling bond yields and an appreciating USD, which translates into lower interest rates and more consumer spending power.
 

The risk-off episode that began in early April, which was just after the “Liberation Day” tariff announcements, saw the opposite. The price of the 10-year Treasury note fell more when denominated in all major currencies except the Chinese yuan. Foreigners were fleeing USD assets and Treasury paper, meaning the pain was amplified.

Had the panic not been stemmed, it was starting to look like a classic emerging market crisis.
 

The full post can be found here.

 

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.    

Sounding the all-clear, but for how long?

Mid-week market update: It's time to sound the all-clear signal, as least in the short run. Both the S&P 500 and the equal-weighted S&P 500 have decisively staged upside breakouts through the falling trend line. The bulls have regained control of the tape.

 

 

The next resistance test is the 50% retracement level at about 5500. How far can the relief rally run?

 

The full post can be found here.

 

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.   

60/40 in an era of American Unexceptionalism

Preface: Explaining our market timing models 

We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can be found here.

  

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the email alerts is updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below.

 

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
• Trend Model signal: Bearish (Last changed from “neutral” on 11-Apr-2025)*
• Trading model: Bullish (Last changed from “neutral” on 28-Feb-2025)*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent and on BlueSky at @humblestudent.bsky.social. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of those email alerts is shown here.

Subscribers can access the latest signal in real time here.

Threats to the 60/40 Portfolio

The conventional asset mix of 60% equities and 40% bond is designed to maximize return and minimize volatility risk under a reasonable set of risk tolerance assumptions. The equity portion of the portfolio is meant to provide growth, while the bond portion is designed to provide portfolio stability as bond prices have low to negative correlation to stock prices. In addition, bonds have the additional benefit of a steady income and high assurance of capital preservation, or getting your money back.
 

What happens if the “getting your money back” assumption is shaken?
 

Investors saw that recently when Treasury yields rose (and Treasury prices fell) and the USD fell at the same time. The episode was interpreted as a possible end to the era of American Exceptionalism and the USD as a safe-haven asset. While we saw a similar episode in early 2018, it nevertheless underscores concerns about the 60/40 portfolio as stock bond correlations were rising in both instances. Rising correlation leads to greater portfolio volatility and a reduction in the diversification effects of the two asset classes, which can be worrisome during the current climate of elevated market stress.

What can investors do under such circumstances?
 

The full post can be found here.

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.  

Known unknowns, and unknown unknowns

Ahead of the Second Gulf War, Secretary of Defense Donald Rumsfeld famously referred to “known knowns”, “known unknowns” and “unknown unknowns” when responding to a question about Iraqi weapons of mass destruction.
 

Fast forward to 2025, investors have to contend with a series of known unknowns and unknown unknowns as they consider their investment policy in an environment where global economic uncertainty has skyrocketed to an all-time high.
 

Here are some known unknowns to consider:

• What are the objectives of Trump’s negotiations and how far is he willing to go?
• When will the chaos subside enough that companies can plan and respond to the changes in tariff regimes?
• Will the U.S. economy fall into recession?

Here are some unknown unknowns to consider:

• Have the USD and Treasury securities permanently lost their position as safe havens?
• How much damage has been done to the post-World War II security and financial architecture?

 

The full post can be found here.

 

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.  

Torturing the data until it talks

Mid-week market update: Market internals are showing signs of a wash-out. Readings are normalizing after an extreme oversold condition against a backdrop of extreme fear. Stock prices should advance from here.

 

On the other hand, the S&P 500 just experienced a "death cross", where the 50 dma falls below the 200 dma. Notwithstanding today's negative surprises from NVIDIA and Fed Chair Powell, the inability of the index to overcome resistance at the 5500 level, which is the site of the 50% retracement and just below a price gap, is disconcerting for the bulls.

 

 

What happens next? Let's review some historical studies, otherwise known as "torturing the data until it talks".

 

The full post can be found here.

 

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates. 

Estimating downside risk

Preface: Explaining our market timing models 

We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can be found here.

  

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the email alerts is updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below.

 

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
• Trend Model signal: Neutral (Last changed from “bullish” on 15-Nov-2024)*
• Trading model: Bullish (Last changed from “neutral” on 28-Feb-2025)*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent and on BlueSky at @humblestudent.bsky.social. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of those email alerts is shown here.

Subscribers can access the latest signal in real time here.

Out of Words to Describe “Oversold”

This is an oversold market, but I’ve run out of words to describe “oversold”.

The percentage of S&P 500 above the 200 dma fell below 20% last week, and the percentage above their 50 dma fell below 10% at the same time. These are rare events that have signaled severely oversold markets.
 

Going back to 2002, which is when these data series were available, the market made a final low in about half of these episodes, and re-tested the previous low, sometimes unsuccessfully, in the other half.

What’s the prognosis? What’s the market’s downside risk?
 

The full post can be found here.

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.

A game theory analysis of the trade war

Bloomberg’s U.S. chief economist Anna Wong published a chart outlining the impact of Trump’s tariff pivot. Trump raised tariffs on China and cut the “reciprocal tariff rate” to 10% for all others, except USMCA members Canada and Mexico, for 90 days. The resulting weighted tariff rate is not substantially different from the “Liberation Day” rates and it remains roughly comparable to the tariff rates of the Smoot-Hawley era. More worrisome is the higher tariff rate on consumer goods under the new regime, which spells stagflation, or higher prices combined with lower growth.

 

 
How will the trade war end? Let’s game theory this out.
 

The full post can be found here.

 

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates. 

Trump's Liz Truss moment?

Mid-week market update: Is this Donald Trump's Liz Truss Moment? In the fall of 2022, UK prime minister passed a series of unfunded tax cuts. The bond market rebelled and sold off hard, especially in the long end of the yield curve. The massive sell-off forced a number of "hedged" pension funds into technical insolvency, which eventually led to the political downfall of the prime minister.

 

Here is where we stand today. The 10-year Treasury yield and other long yields have spiked. The MOVE Index, which is the VIX of the bond market, is up sharply. The yield curve is has marginally recovered from inversion, but nevertheless indicates tight monetary conditions. The trade war factor, which measures the performance of stocks with domestic revenues relative to the S&P 500, has surged.

 

Even as investors fret about how tariffs are affecting the stock market, the real action is in the bond market.

 

The full post can be found here.

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.

 

Force Majeure

Just a quick update in a day with a fast moving market. Trump's tariffs are eliciting a reaction among key supporters and the real economy. Pittsburgh based Howmet Aerospace, a key supplier to Airbus and Boeing, declared force majeure on its contracts owing to the new tariff regime. Force majeure is a legal practice allows enabling contracted parties to avoid obligations due to unavoidable or unpredictable external circumstances.

 

This measure is likely just the tip of the iceberg. We will undoubtedly see other signs of economic slowdown in the coming days.

The full post can be found here.

 

 Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.

A big bear, or just a plain vanilla correction?

Preface: Explaining our market timing models 

We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.

The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can be found here.

  

My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the email alerts is updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below.

 

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
• Trend Model signal: Neutral (Last changed from “bullish” on 15-Nov-2024)*
• Trading model: Bullish (Last changed from “neutral” on 28-Feb-2025)*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent and on BlueSky at @humblestudent.bsky.social. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of those email alerts is shown here.

Subscribers can access the latest signal in real time here.

The Big One?

In light of the market’s negative surprise from Trump’s tariff announcement, the key question for investors is whether the latest pullback is just a plain vanilla correction or the Big One, which signals the start of a recession-induced bear market. As the accompanying chart shows, the S&P 500 experienced average intra-year drawdowns of -14.1%, compared to the current pullback of -17.4% so far.

 
How worried should you be? 

The full post can be found here.

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.

 

Crafting investment policy in an America First world

What should investors make of Trump’s “Liberation Day” tariffs, which was characterized as “worst than the worst-case scenario”? Instant analysis from several sources shows that the weighted average tariff rate is now higher than the rates from the Smoot-Hawley era of the 1930s. Trump claims that his tariffs will raise $6 trillion over the next decade, which amounts to the largest tax hike in U.S. history.

I pointed out last week that Trump’s abrupt shift in U.S. policy is making the world undergo a dramatic regime shift in investment environment (see Uncharted Investor Waters: From Soft to Hard Power). The key big picture question is how investors should formulate investment policy under these new circumstances.

The full post can be found here.

 

 

Special announcement: Humble Student of the Markets will cease publication on March 31, 2026. See this announcement for more details and updates.

Here's what's more important than the tariff announcement

Mid-week market update: The market approached Trump's "Liberation Day" tariff announcement all beared up. Trading desk surveys indicate that most retail and institutional market participants had reduced risk coming into the announcement, with outright bears outnumbering the buy-the-dip crowd by 7%.

 

 

While the ultimate outcome of the Trump tariffs will move markets, there's something even more important than the announcement.

The full post can be found here.