Friday, September 22, 2023
Is stagflation in our future?
Wednesday, September 20, 2023
A hawkish pause, but don't panic
The full post can be found here.
Sunday, September 17, 2023
A battle royale for control of the tape
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 “bearish” on 03-Aug-2023)*
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.
Decision time
It’s nearing decision time. Both the S&P 500 and the NASDAQ 100 are forming wedge formations while testing their 50 dma supports. Will the market break up or down through the trend lines?
Upside or downside breaks would have strong directional implications. I believe the odds favour the bears. Here’s why.
The full post can be found here.
Saturday, September 16, 2023
How the USD could sink the S&P 500
Correlation isn’t causation, but the USD Index has shown a close inverse correlation to the S&P 500. The relationship partly ended when the S&P 500 surged on AI mania. However, small-cap stocks, which are less subject to the enthusiasm over the AI revolution, maintained their inverse correlation.
The USD Index is approaching a key resistance level. Assuming the inverse correlation were to continue, what are the bear and bear cases for the USD, and consequently U.S. equities?
Wednesday, September 13, 2023
EM contrarian and momentum opportunities
Sunday, September 10, 2023
Tripwires to a deeper correction
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 “bearish” on 03-Aug-2023)*
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.
Where’s the bottom?
I highlighted how the 5-week RSI of the S&P 500 became extremely overbought. In the past, such instances have resolved with a correction (check), a relief rally (check), followed by a re-test of the correction lows. In three of the last four cases, the second re-test held at the old lows. The only exception was the COVID Crash of 2020, which was panic driven by macro fundamentals. If history is any guide, the next corrective low should terminate at about the site of the August low, which is ~4350.While my base case is a bottom at about 4350, I nevertheless have to allow for the possibility of a deeper correction. Here’s what I am watching.
Saturday, September 9, 2023
Investing during an era of Fiscal Dominance
The full post can be found here.
Wednesday, September 6, 2023
Can the S&P 500 overcome negative seasonality?
Mid-week market update: While I give seasonality only passing importance in trading, it is well known that September is seasonally negative for S&P 500 returns, which Callum Thomas recently documented.
Can the stock market escape the negative seasonal pattern in 2023?
The full post can be found here.
Sunday, September 3, 2023
Vulnerable to a setback
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 “bearish” on 03-Aug-2023)*
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.
Mission accomplished
- The S&P 500 exceeded the 50% retracement of the downdraft.
- The NYSE McClellan Oscillator (NYMO) reached the zero neutral level.
- The VIX Index reached its 20 dma. In fact, it blew through the 20 dma to breach its lower Bollinger Band, which is an overbought condition.
Friday, September 1, 2023
A point and figure tour around the world
Point & Figure charts consist of columns of X’s and O’s that represent filtered price movements. X-Columns represent rising prices and O-Columns represent falling prices. Each price box represents a specific value that price must reach to warrant an X or an O. Time is not a factor in P&F charting; these charts evolve as prices move. No movement in price means no change in the P&F chart.
Sunday, August 27, 2023
Is the relief rally over?
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: Bullish (Last changed from “neutral” on 16-Aug-2023)*
Update schedule: I generally update model readings on my site on weekends. I am also on Twitter at @humblestudent and on Mastodon at @humblestudent@toot.community. 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.
Sell the news?
Friday, August 25, 2023
The risks to the resilient bull
Wednesday, August 23, 2023
How far can the relief rally run?
Sunday, August 20, 2023
Why I am both bullish and 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 “bearish” on 03-Aug-2023)*
Update schedule: I generally update model readings on my site on weekends. I am also on Twitter at @humblestudent and on Mastodon at @humblestudent@toot.community. 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 and bearish on different time horizons
As the S&P 500 violated its 50 dma but reached an oversold condition on the percentage of stocks above their 20 dma, I am bullish and bearish on stocks, depending on the time frame.- Due for a Relief Rally: The market is due for a bounce (1–2-week horizon).
- A Deeper Correction: There may be unfinished business to the downside once the relief rally is complete (3–6-week horizon).
- Long-term Bullish: The technical structure of market action points to a longer-term bull trend.
The full post can be found here.
Saturday, August 19, 2023
What are the contagion effects of a China slowdown?
The full post can be found here.
Wednesday, August 16, 2023
Pooised for a rebound
The full post can be found here.
Sunday, August 13, 2023
Will NASDAQ weakness unravel the bull?
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 “bearish” on 03-Aug-2023)*
Update schedule: I generally update model readings on my site on weekends. I am also on Twitter at @humblestudent and on Mastodon at @humblestudent@toot.community. 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 weak NASDAQ
Call the Market Police! The NASDAQ Composite has fallen for two consecutive weeks and violated a rising trend line. It seems that the AI-fueled party is over.
The key question is whether this pullback unravels the equity bull case.
The full post can be found here.
Saturday, August 12, 2023
The TARA risk from Japan
The forward P/E ratio of the S&P 500 had been tracking the inverse of the 30-year Treasury yield in the last 10 years until early 2023 when they diverged. The forward P/E and Treasury yields rose together, which made bonds more attractive. That’s the TARA valuation threat to U.S. equities.
The full post can be found here.
Wednesday, August 9, 2023
Buy or sell this resilient stock market?
Sunday, August 6, 2023
How to spot the correction bottom
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 “bearish” on 03-Aug-2023)*
Update schedule: I generally update model readings on my site on weekends. I am also on Twitter at @humblestudent and on Mastodon at @humblestudent@toot.community. 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 correction in an uptrend
It seems to have finally happened. The S&P 500 stalled and turned down on the news that Fitch had downgraded U.S. government debt. The ratings downgrade shouldn’t have been a risk-off trigger. U.S. Treasury paper is regarded as the default-free and risk-free asset. No one buys Treasuries based on a credit rating. In fact, the market reaction to the ratings downgrade was a steepening of the yield curve. Short Treasury yields fell while longer-term yields rose. If the market was truly rattled by the change in credit rating, yields should have risen across the board.
The full post can be found here.
Saturday, August 5, 2023
Trust (the bull), but verify (there's no recession)
Wednesday, August 2, 2023
A test of bullish conviction
Sunday, July 30, 2023
On the verge of a long-term buy signal
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: Sell equities (Last changed from “buy” on 26-Mar-2023)*
- Trend Model signal: Neutral (Last changed from “bullish” on 17-Mar-2023)*
- Trading model: Neutral (Last changed from “bearish” on 15-Jun-2023)*
Update schedule: I generally update model readings on my site on weekends. I am also on Twitter at @humblestudent and on Mastodon at @humblestudent@toot.community. 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 likely buy signal ahead
- Buy when the monthly MACD histogram changes from negative to positive.
- Sell the market exhibits a negative 14-month RSI divergence.
The month isn’t over yet, but when this model is applied to the broadly based NYSE Composite, it is on the verge of a buy signal, with the caveat that it’s never a good idea to front-run model readings. Significant market strength on Monday, which is the month-end, could tip the model reading into buy territory. Otherwise, the model should flash a buy signal in August barring a major pullback.
This model has performed well on an out-of-sample basis. It was timely in flashing a sell signal in late 2018. It bought back into the market in 2019 and sold just as the market topped in early 2020. It turned bullish again in late 2020 and became bearish in early 2022.
The history of past buy signals has usually indicated relatively long-lived bull runs with only minor drawdown risk.
The full post can be found here.
Saturday, July 29, 2023
Could a credit event derail the equity bull?
Wednesday, July 26, 2023
It's not just about the Fed
The market faces far more sources of volatility than just the Fed.
The full post can be found here.
Sunday, July 23, 2023
A new cyclical bull?
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: Sell equities (Last changed from “buy” on 26-Mar-2023)*
- Trend Model signal: Neutral (Last changed from “bullish” on 17-Mar-2023)*
- Trading model: Neutral (Last changed from “bearish” on 15-Jun-2023)*
Update schedule: I generally update model readings on my site on weekends. I am also on Twitter at @humblestudent and on Mastodon at @humblestudent@toot.community. 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 momentum buy signal
Technical buy signals are coming out of the woodwork, supported by strong price momentum and signs of broadening market breadth.Ryan Detrick pointed out that the S&P 500 is on the verge of a five-month win streak of consecutive positive returns. Historically, market strength begets more strength.
Saturday, July 22, 2023
The risks to the disinflation and soft-landing bull case
Wednesday, July 19, 2023
Scenes from Q2 earnings season
Sunday, July 16, 2023
The soft landing vs. slowdown debate
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: Sell equities (Last changed from “buy” on 26-Mar-2023)*
- Trend Model signal: Neutral (Last changed from “bullish” on 17-Mar-2023)*
- Trading model: Neutral (Last changed from “bearish” on 15-Jun-2023)*
Update schedule: I generally update model readings on my site on weekends. I am also on Twitter at @humblestudent and on Mastodon at @humblestudent@toot.community. 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 fragile consensus
It’s remarkable how swiftly the consensus narrative can change. Two weeks ago, the 2-year Treasury yield spike above 5% when the ADP Non-farm Employment report came in at a blowout 497K, which was well ahead of expectations of 228K. The news prompted speculation that the Fed would have to tighten more than expected and send the economy into recession.
Last week, the softer-than-expected CPI report abruptly shifted the tone of the consensus to a soft landing and sparked a risk-on rally in risk assets and yields retreated. This matters because the 2-year Treasury yield is a proxy for market expectations of the Fed Funds rate. Past peaks in the 2-year rate have either been coincidental or led peaks in Fed Funds.
The current environment illustrates the fragile nature of the market consensus. If the narrative can flip from bear to bull in a week, it may not take much for it to flip back. The market is at a critical juncture. Team Soft Landing is locked in a cage match with Team Slowdown. Who wins?
The full post can be found here.