Sunday, January 28, 2024

Numerous wildcards add up to ST volatility

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 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.



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 17-Jan-2024)*
* 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. 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 time for caution

As the S&P 500 tests the 4900 level, it faces a number of key technical, top-down macro and fundamental challenges. These challenges are wildcards to the near-term path of stock prices and form the potential for volatility in the coming week.

From a technical perspective, some caution is warranted. We recently highlighted a short-term buy signal when NYSE McClellan Oscillator (NYMO) recycled from oversold to neutral. The “take profits” tripwire for this trading signal occurs when NYMO reaches a positive reading, which occurred last Thursday. If you were tactically long the market, it’s time to reduce risk. Don’t try to be a hero.
 
 
The full post can be found here.

Beat the price increase

We are announcing a 5% price increase on subscriptions, effective February 1, 2024. Existing subscribers will be grandfathered at their current rates.

If you haven't subscribed, click this link to beat the price increase.

No comments: