The stealth breakout you may have missed

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: Neutral (Last changed from “bullish” on 24-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 convincing breakout at 2100

My recent publication highlighting the opportunity in gold mining stocks worked out better than expected (see How gold miners could be a refuge from the YOLO and FOMO frenzy). The gold miners’ ETF (GDX) is up slightly over 10% in under two weeks.

While GDX may be a little extended in the short run, I would like to point out the long-term potential in gold. Gold has staged a convincing upside breakout from a multi-month cup and handle formation. Moreover, the gold-to-S&P 500 ratio (bottom panel) is turning up from a multi-year saucer-shaped bottom, indicating the possible start of a new relative bull for gold over stocks. As well, the breakout has occurred with little fanfare as investors have been focused on AI and GLP-1 plays. This combination of breakout and lack of public participation suggests a substantial upside potential.

 

 The full post can be found here.