The full post can be found here.
Wednesday, July 24, 2024
4 reasons why you should buy the Great Rotation
Sunday, July 21, 2024
Hey, hey, LBJ, how many kids have you killed today?
The one burning question of the Great Rotation
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 23-May-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.
Here come the Great Rotation
The full post can be found here.
Saturday, July 20, 2024
Positioning for Trump 2.0
In the wake of Biden’s subpar debate performance and the assassination attempt on Trump, the prediction markets’ odds of a Trump victory in November have substantially risen. Equally important is Wall Street’s reaction, which has investors sitting up to take notice of the implications of a second Trump Administration in 2025.
Despite the real-time information from the betting markets, financial markets haven’t fully discounted the possibility of a Trump win. Here’s how you can take advantage of that arbitrage opportunity.
Wednesday, July 17, 2024
How the small cap breakout could be short-term bearish
Saturday, July 13, 2024
A roadmap for the rest of 2024
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.
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: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Neutral (Last changed from “bullish” on 23-May-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.
Another upper BB ride
The S&P 500 went on an upper Bollinger Band ride and unusually pulled back on Thursday after the soft CPI report and closed below the upper BB on Friday. What’s unusual is the risk-on tone adopted by the rest of the stock market even as heavyweight technology stocks in the S&P 500 weakened. The small-cap Russell 2000 gapped up and staged an upside breakout through a key resistance level in response to the prospect of lower interest rates owing to the weak CPI print.Historically, the S&P 500 has consolidated sideways for a few days after upper BB rides. Will this time be any different, or does small-cap strength foreshadow further price advances in the near future? What about the rest of 2024?
The full post can be found here.
Trading the slow market melt-up
The accompanying chart from Jurrien Timmer at Fidelity illustrates my point. If this is a bubble in the making, it could run a lot further as valuation differences are nowhere near the height of the Nifty Fifty or Dot-Com Bubble eras.
Wednesday, July 10, 2024
How I missed a trade (and what I would do)
The full post can be found here.
Sunday, July 7, 2024
Tops are processes
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.
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: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Neutral (Last changed from “bullish” on 23-May-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.
Warnings everywhere
Even as the S&P 500 reached another all-time high, numerous warnings about a market top have been appearing in my social media feed and elsewhere, starting with the elevated level of the forward P/E ratio. The S&P 500 forward P/E now stands at 21.2, which is above its 5-year average of 19.3 and 10-year average of 17.9.
The full post can be found here.
Saturday, July 6, 2024
How politics is intruding on Fed policy
Recent U.S. economic data has generally been weakening, as evidenced by the decline in the Citigroup Economic Surprise Index (ESI, gold line), which measures whether economic data is beating or missing expectations. As ESI has been roughly correlated to bond yields, this should put downward pressure on rates and expectations of rate cuts in the near future.
Not so fast! Fed policy has become increasingly constrained by politics, both on a short- and long-term basis. Here’s why.
Wednesday, July 3, 2024
Positive seasonality boost the S&P 500
Sunday, June 30, 2024
How much is left in the bulls' gas tank?
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.
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: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Neutral (Last changed from “bullish” on 23-May-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.
Too far, too fast?
In light of these strong returns, how much gas is left in the bulls’ gas tank? Is this the case of the market going up too much, too fast?
Saturday, June 29, 2024
A Q2 earnings season preview
Wednesday, June 26, 2024
A market of NVIDIA and everything else
Sunday, June 23, 2024
Why the breadth divergence may not be bearish
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.
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: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Neutral (Last changed from “bullish” on 23-May-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 case of bad breadth
Even though these breadth divergences are concerning, they are not necessarily bearish signals. Here’s why.
Saturday, June 22, 2024
Why the November election matters to gold
I am reiterating my bullish outlook on gold. The yellow metal staged an upside breakout from a cup and handle pattern in March. As well, the long-term inflation expectations of ETF (RINF) has been in a steady uptrend. The only question is how far and how fast can gold run?
The future may be bright as gold prices respond to unexpected inflation. The non-partisan Congressional Budget Office (CBO) recently updated its projection of the U.S. fiscal path by raising its FY 2024 estimate of the deficit from $1.5 trillion to $1.9 trillion, driven by emergency spending on foreign assistance to Israel, Ukraine and Taiwan, as well as student loan relief. The long-term picture also deteriorated, the deficit rises to $2.8 trillion by 2034 and debt is expected to grow to 122% of GDP by 2034.
Wednesday, June 19, 2024
What's different this time
Sunday, June 16, 2024
Tactically cautious but not bearish
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.
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: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Neutral (Last changed from “bullish” on 23-May-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.
Time for cheap protection?
Last week, I suggested that the stock market was susceptible to a setback (see A Time For Tactical Caution). Even though the pullback never appeared, I reiterate my cautious view, though I am not outright bearish.In light of the market’s vulnerable position, it may be time to exploit the low VIX and buy some cheap downside protection in the form of protective put options. The S&P 500 achieved a fresh all-time high while exhibiting a negative 5-week RSI divergence. As well, the VVIX/VIX ratio is showing a negative divergence. Such episodes have tended to resolve bearishly in the past. As well, the VIX Index is low and testing its lower boundary at 12, indicating low option premium and cheap cost of downside protection.
Saturday, June 15, 2024
The market gods present patient investors with three gifts
Remember that equity investors tend to enjoy strong returns in the absence of recession, which dents returns, or war and revolution, which can result in a permanent loss of capital. With those caveats in mind, the market gods are presenting patient investors with three gifts from the three economic blocs in the world: the U.S., Europe, and China.
The full post can be found here.