Time to Sound the All-Clear?

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 “bearish” on 27-Jun-2025)*
• Trading model: Neutral (Last changed from “bullish” on 31-Jul-2025)*

* 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 and on BlueSky at @humblestudent.bsky.social. 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.

 

On the Verge of a Buy Signal

Ever since the NYSE McClellan Summation Index (NYSI, bottom panel) broke support on the weekly chart, I warned that the stock market was at risk of a pullback. Indeed, stock prices did briefly weaken, but they have rallied and begun to consolidate sideways. In addition, NYSI has begun to turn up. Is the pullback over?

 

The answer to this question can be found in the 14-week RSI (top panel), which ended the week just shy of the 70 overbought level. In the last five years, the market has continued to rally whenever the RSI returned to an overbought, which I call a “good overbought”, condition. The episodes when stock prices continued to weaken were accompanied by falling RSI readings.

 

I am seeing signs of constructive healing in market internals and I am on the verge of a buy signal, but it may be too early to sound the all-clear just yet.

The full post can be found here.