Sunday, January 17, 2016

Buy! Blood is in the streets!

Trend Model signal summary
Trend Model signal: Risk-off
Trading model: Bullish (upgrade)

The Trend Model is an asset allocation model which applies trend following principles based on the inputs of global stock and commodity price. In essence, it seeks to answer the question, "Is the trend in the global economy expansion (bullish) or contraction (bearish)?"

My inner trader uses the trading model component of the Trend Model seeks to answer the question, "Is the trend getting better (bullish) or worse (bearish)?" The history of actual out-of-sample (not backtested) signals of the trading model are shown by the arrows in the chart below.

Update schedule: I generally update Trend Model readings on my blog on weekends and tweet any changes during the week at @humblestudent.

How worried should you be?
Well, the stock market certain took a fright last week! At this point, we have to ask ourselves the question of how worried should we be about the market outlook.

For investors, the answer to that question depends on your time horizon. Do you need the money next month, next quarter or next year? If you need the money in such a short period, then did your asset allocation reflect those circumstances? I would contend that as your anxiety level should be falling as your time horizon lengthens.

In this week`s review, I will cover the following topics, starting from long term framework to a shorter one:
  • What is the downside tail-risk for stock prices?
  • What's the upside potential?
  • What does the near-term risk-reward environment for stock prices?
The full post is at our new site here.

Site Notice
The new site went down on Friday because of a failed software update. As a result, we are extending the deadline for taking new subscribers from midnight Friday (Pacific Time) to midnight Tuesday January 19, 2016.

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