A framework for a Sino-American relationship

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 Model is an asset allocation model which applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. In essence, it seeks to answer the question, "Is the trend in the global economy expansion (bullish) or contraction (bearish)?"

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 those email alerts are 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*
• Trend Model signal: Neutral*
• Trading model: Neutral*

* 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 and tweet mid-week observations at @humblestudent. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of the those email alerts is shown here.



A framework for Sino-American relations
The anticipation is over. The Trump-Xi summit is done. Did you think that things would be so easy, and everything could be solved in a single meeting?

The market came into weekend knowing that there was a high degree of uncertainty surrounding the summit, but the consensus was both sides would agree to a trade truce. Mytrade war factor, which measures the relative performance of companies with pure domestic revenues, was complacent about the prospects of a trade war.

The option market behaved in a similar way. The ratio of 9-day implied volatility (VXST) to one-month volatility (VIX) exhibited only mild signs of anxiety, and levels were not high compared to recent history.

The market was indeed fortunate that the outcome was slightly better than market expectations. Not only did both sides agree to a truce while discussions continue, and Trump has lifted a temporary ban on on American companies selling equipment to Huawei.

Notwithstanding the short-term results from the summit, here are some issues that investors and policy makers should think about in terms of the future Sino-American relations.

• If this is a war, what costs is America willing to bear?
• Is this a trade war, or something more?
• How much support can the Fed offer, and what are the implications of the Fed's actions?

The full post can be found here.