Wednesday, April 24, 2024
A V-shaped rebound, or dead cat bounce?
Sunday, April 21, 2024
What's bothering the stock market?
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.
- Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
- Trend Model signal: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Bullish (Last changed from “neutral” on 16-Apr-2024)*
Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent. 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 trifecta of woes
What’s bothering the stock market? Stock prices have had to contend with a trifecta of woes:- Fear of a hawkish pivot by the Fed;
- Strong USD; and
- Geopolitical risk and rising oil prices.
The full post can be found here.
Saturday, April 20, 2024
Are we in for a 1970's style inflation revival?
The full post can be found here.
Wednesday, April 17, 2024
Oversold enough for a bottom?
- Is this a bottom?
- If this is a bottom, is it a durable bottom or just a bounce before prices weaken further?
Sunday, April 14, 2024
Here comes the sentiment flush
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.
- Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
- Trend Model signal: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Bearish (Last changed from “neutral” on 15-Mar-2024)*
Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent. 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.
Is the decline over?
The full post can be found here.
Saturday, April 13, 2024
How expensive are US equities?
Wednesday, April 10, 2024
Goodbye to June, hello September
Some participants noted that the recent increases in inflation had been relatively broad based and therefore should not be discounted as merely statistical aberrations. However, a few participants noted that residual seasonality could have affected the inflation readings at the start of the year.
Several participants noted that the disinflationary pressure for core goods that had resulted from the receding of supply chain bottlenecks was likely to moderate.
Saturday, April 6, 2024
How serious is the market's trend break?
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.
- Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
- Trend Model signal: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Bearish (Last changed from “neutral” on 15-Mar-2024)*
Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent. 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.
What rotating correction?
It finally happened. I’ve been warning about the extended nature of the market advance since late January, and the pullback seems to have begun. The S&P 500 violated a rising trend line that stretches back to November last Thursday. Friday’s market rebound didn’t help as it left the index below the rising trend line.
The full post can be found here.
Looking for inflation in all the wrong places
As well, Chicago Fed President Goolsbee revealed that he wrote down two rate cuts for 2024 in his dot plot projection, which is a surprise as he has been regarded as a dove. Moreover, he stated that if inflation continues to move sideways, it raised doubt as to whether the Fed should cut at all. Minneapolis Fed President Kashkari also revealed that he wrote down two rate cuts for 2024, and also openly wondered if the Fed needs to cut if progress on inflation stalls.
Is it time to say goodbye to a June rate cut? What about the expectation of three cuts this year?
As a reminder, the Fed targets headline PCE as its main inflation metric. Both headline and core PCE rose in January and February after a series of tame readings in late 2023. The key question that concerns Fed officials is the last mile inflation question. How persistent is inflation and what’s the path to the 2% target? Investors may gain some insights from the FOMC meeting minutes, which are due to be released in the coming week.
The full post can be found here.
Wednesday, April 3, 2024
Guideposts to a deeper pullback
Sunday, March 31, 2024
The stock market's Q2 challenges
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.
- Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
- Trend Model signal: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Bearish (Last changed from “neutral” on 25-Mar-2024)*
Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent. 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 "good overbought" condition
The full post can be found here.
Friday, March 29, 2024
Why the first Fed rate cut will be later than June
Wednesday, March 27, 2024
Lucy and the correction football
Sunday, March 24, 2024
This bull run is nowhere near finished
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.
- Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
- Trend Model signal: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Bearish (Last changed from “neutral” on 25-Mar-2024)*
Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent. 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.
Market structure review
Saturday, March 23, 2024
The investor's cyclical mystery
Copper is a cyclically sensitive metal that was given the moniker of Dr. Copper, because it is said to have a Ph.D. in economics because of its ability to forecast global economic trends. Its recent breakout from a 10-month base excited a lot of people. Similarly, the turnaround in the relative performance of materials stocks was interpreted as a cyclical green shoot.
Therein lies the mystery. Are the markets signaling a cyclical rebound, or not?
Wednesday, March 20, 2024
It's all about expectations
Fast forward a month. The company unveiled its new chip and the market reaction was a thud. In fact, the AI bellwether Semiconductor Index weakened and violated a relative uptrend channel (bottom panel). This was a lesson in expectations, how the market reacted to incoming data, and how expectations evolve.
Sunday, March 17, 2024
The stealth breakout you may have missed
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.
- Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
- Trend Model signal: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Neutral (Last changed from “bullish” on 24-Jan-2024)*
Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent. 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 convincing breakout at 2100
Friday, March 15, 2024
A reply to Grantham's AI warning
But every technological revolution like this – going back from the internet to telephones, railroads, or canals – has been accompanied by early massive hype and a stock market bubble as investors focus on the ultimate possibilities of the technology, pricing most of the very long-term potential immediately into current market prices. And many such revolutions are in the end often as transformative as those early investors could see and sometimes even more so – but only after a substantial period of disappointment during which the initial bubble bursts. Thus, as the most remarkable example of the tech bubble, Amazon led the speculative market, rising 21 times from the beginning of 1998 to its 1999 peak, only to decline by an almost inconceivable 92% from 2000 to 2002, before inheriting half the retail world!
As much as I respect Grantham’s investment insights, he suffers from the value investor problem of being too early and overly reliant on valuation for his views. I reiterate my view that it’s still early in the bull cycle for AI stocks (see The Path to Magnificent Exuberance). Here’s why.
Wednesday, March 13, 2024
Waiting for the recycle amidst an elevated tail-risk backdrop
I agree. I've been saying the same thing for several weeks. A correction or pullback is on the horizon, but hasn't arrived yet. While signs of technical deterioration are appearing, a sideways consolidation marked by a rolling correction is very possible.
Sunday, March 10, 2024
A Hindenburg Moment for growth stocks?
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.
- Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
- Trend Model signal: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Neutral (Last changed from “bullish” on 24-Jan-2024)*
Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter at @humblestudent. 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.
NASDAQ Hindenburg warnings
I have been concerned about the extended and frothy nature of the advance in growth stocks. Worries came to a head when the Semiconductors Index rallied through and reversed though an upward trending relative performance channel, indicating a possible blow-off top. Beneath the hood, however, market internals are signaling breadth deterioration for NASDAQ stocks that warn of an impending corrective downdraft.
NASDAQ stocks have been flashing Hindenburg Omens starting in January and the warnings continued into February. While the signal isn’t perfect, the history of such clusters in the last 10 years has usually resolved in declines, shown as pink bars), while the instances of false positives (grey bars) have been relatively low.
The full post can be found here.