The Animal Spirits are Back in Charge!

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 “bearish” on 16-May-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 Speculative Breakout

It is said that there is nothing more bullish than a new high, but how should investors interpret the latest round of upside breakouts?

The S&P 500 made a fresh high Friday. Even before Friday’s upside breakout, the high-octane and speculative parts of the stock market have already staged upside breakouts to all-time highs. The NASDAQ 100 and the ARK Innovation ETF (ARKK), which represents speculative growth stocks, have already broken out. By contrast, the equal-weighted S&P 500, which measures the average stock in the index, is well below its highs.

The animal spirits are back and the market is becoming frothy.
 

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.      

The Surprise Victor of the Israel-Iran War

So far, the Middle East truce is holding and oil prices have begun to normalize. An Economist article featured analysis from the Ceasefire Group that studied ceasefires between 1989 and 2020 and found about half were successful, one-third collapsed and the outcome of the remainder were inconclusive. Of Middle East ceasefires, about half failed.

 

I assess the current situation in the Israel-Iran conflict and its implications for investors.
 

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 Forthy Breakout

Mid-week market update: One of the bullish tripwires I outlined on the weekend has triggered (see Buy the Cannons: Exploring the Bull Case). The small cap Russell 2000 ETF staged an upside breakout through the neckline of an inverse head and shoulders pattern, with a measured upside objective of ~250, which represents a potential upside of roughly 18%.

 

 

The breakout was accompanied by a frothy revival of the market's animal spirits. 

 

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.      

Buy the Cannons: Exploring the Bull Case

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 “bearish” on 16-May-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.

 

The Minority Report

As we write these words, the U.S. has chosen to enter the war against Iran. The extremely thin contract-for-difference trading for the Dow is down about -1%. Is this a time to embrace the contrarian adage of “buy on the cannons, sell on the trumpets”? 

I have been fairly cautious about the U.S. equity market, but like all good investors, I would like to consider the bull case. While my base case still calls for a trading range for the S&P 500 for the remainder of the year, and the index is still flashing a negative RSI divergence warning, I am open to the possibility that stock prices could break out to all-time highs. I estimate the odds of that bullish as one-in-three or four.

 
Here are my reasons to be bullish.

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.     

Forecasting Fed Policy: Hints From Hard Data

As expected, the Federal Reserve left interest rates unchanged. The Fed Chair acknowledged a high degree of uncertainty about the effects of tariffs: “Ultimately the cost of the tariff has to be paid, and some of it will fall on the end consumer. We know that’s coming, and we just want to see a little bit of that before we make judgments prematurely.”

The “dot plot” took a surprising hawkish turn. Seven FOMC members expect no rate cuts in 2025, compared to four in March, and two expect a single quarter-point cut, compared to four in June. But the hawkish pivot occurred against a backdrop of uncertainty as Powell admitted that the projected policy path is only a guess. The Fed’s forecast of inflation and growth has become clouded in the face of the unknown effects of tariffs: “We haven’t been through a situation like this, and I think we have to be humble about our ability to forecast it.”

It is not surprising that Fed policy makers have adopted a wait-and-see attitude as they watch for clues from the hard economic data.

 

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.    

 

The Three Most Important Words in Investing

Mid-week market update: As expected, the Fed stayed on hold today and took a wait-and-see attitude on the timing of rate cuts. While economic data has softened recently, as evidenced by the decline in the U.S. Economic Surprise Index, the Fed is still waiting for clarity on the effects of tariffs on inflation to make monetary policy decision. Even the dot plot represents nothing more than guesses that are subject to change.

 

In other words, the Fed has uttered the three most important words in investing: "I don't know."

 

 

Indeed, investors are facing uncertainty and binary event risk relating to the trade war, monetary policy, and the Israeli-Iran conflict. How can mere mortals like us pretend to forecast the future?

 

In circumstances like these, it's better to say, "I don't know."

 

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.    

How to Capitalize on Narrative Volatility

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 “bearish” on 16-May-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.

 

Waiting for the Next Shoe to Drop

Michael Kantro at Piper Sandler recently highlighted the unusual elevated levels of narrative volatility in AAII sentiment. As a consequence, the volatility has created “a lot of false-start leadership moments for rate-sensitives and small caps”.

Kantro’s observation is consistent with our own analysis of an elevated VIX Index during the trade war phase of Trump 1.0. Here are several set-ups of sources of volatility or upcoming reversals in the near term that could rattle traders. The suggested trades are the combination of identifiable underlying trends and technical breaks as signals for short-term profit. 

In other words, when does the next shoe drop and how can traders capitalize on the break?

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 Preview of the Trump Fed

In the wake of the tame May CPI report, the Trump Administration publicly pressured the Fed to cut rates on social media. CNBC reported that Trump called Powell a “numbskull” and he “may have to force something” if Powell doesn’t act.

No serious economist takes Trump’s desire to cut rates by 1% seriously. However, as Jerome Powell’s term as Fed Chair nears its end, it is useful to consider how a Trump-dominated Federal Reserve might affect future policy in the future.
 

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.   

I want to believe

Mid-week market update:  One of the running themes of the TV show, the X-Files, is a poster on the wall of FBI agent Mulder with the caption "I want to believe". 

 

As the S&P 500 breaks out at the 6000 resistance level and Street strategists scramble to their index targets, I also want to believe in that stocks can go higher, but I have my doubts.

 

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 cresting tide?

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 “neutral” on 16-May-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.

Weak Breadth and Narrow Leadership

As the S&P 500 tests a key resistance level, the underlying market action is starting to feel like a cresting tide. Beneath the surface, the equal-weighted index has yet to reach its own resistance level, indicating poor breadth and narrow leadership.

 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.  

Why "Sell America" isn't equity bearish

I have been fairly cautious in my U.S. equity outlook in these pages, but that doesn’t mean I am equity bearish. The accompanying chart shows the progress of different major regional stock markets priced in USD in the last 20 years. With the exception of China, whose stock market doesn’t reflect its economy, stock prices have risen in various degrees over that time period.

 
The top panel of the chart shows that S&P 500 has handily beaten global markets since the GFC and it has retreated back to the rising trend line. Conventional technical analysis calls for investors to buy the dip, with a stop loss just below the trend line. I argue for the Sell America trade of minimizing exposure to USD assets in a broadly diversified portfolio.
 

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.    

 

The S&P 500 nears a ceiling

Mid-week market update: The S&P 500 has been a little stronger than I expected as it tests upside resistance. I would urge traders to exercise caution as the market is exhibiting negative RSI divergences. Even though these kinds of divergences can persist for a while, they nevertheless indicate limited upside potential.

 

 

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.    

Bullish exhaustion = Pullback or consolidation

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 “neutral” on 16-May-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.

Bullish Exhaustion

You can tell a lot about market psychology by the way it responds to news.

The accompanying chart shows how the S&P 500 responded in the extended trading hours and during the trading day to important news. Why did the S&P 500 rally 2.1% after Trump announced he was pausing the 50% tariffs on the EU for a month? Why did the index initially rally but ended the trading day with just a 0.4% gain last Thursday when the U.S. Court of International Trade ruled that Trump exceeded his authority when he imposed “Liberation Day” tariffs and the tariffs on Canada, Mexico and China for fentanyl smuggling?
 

Stock prices weakened Friday in reaction to an angry social media declaration by President Trump that China had violated its trade agreement. I interpret the market’s inability to react to good news as a sign of bullish exhaustion.

 

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.