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.