The Challenges of Narrow Breadth

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.

 

A Magnificent Seven Market

I have heard many concerns from chartists in the past few months about the narrow nature of breadth in the U.S. equity market. Today, the Magnificent Seven dominate market leadership while the equal-weighted S&P 500 lag the cap-weighted index.
 

I am reminded of Bob Farrell’s Rule #7: “Markets are strongest when they are broad and weakest when they narrow to a handful of blue-chip names”; and Rule #3: “There are no new eras—excesses are never permanent”.

How worried should investors be?
 

The full post can be found here.

Peering into 2026: Prepare for Momentum Tailwinds

My former colleague Fred Meissner revealed a disturbing contrarian warning in a recent weekly commentary: “The most concerning story: recently I was on a panel for the CFA Society of San Francisco. All three analysts had the same outlook, which is my base case – a yearend rally followed by problems in the first part of 2026.”

It seems that everyone is looking for a rally into year-end, followed by weakness in the new year. Here is where I differ from that consensus. I believe the stock market should rally into year-end, followed by continued bullish tailwinds, at least for the first half of the year.

 

My long-term market timing model remains on a buy signal. As a reminder, this model flashes a buy signal whenever the monthly MACD of the NYSE Composite (bottom panel) turns positive and sells whenever the 14-month RSI flashes a negative divergence.

The bull is alive, and it’s helped by three major tailwinds going into 2026, namely a stimulative monetary policy, a stimulative fiscal policy, and strong price and fundamental momentum.

The full post can be found here.

The Real Reason the Market Skidded Yesterday

Mid-week market update: I noted on the weekend that the S&P 500 was at the end of a upper Bollinger Band ride, and such instances usually resolve in consolidation or pullbacks. In the past, the pullback usually ended at the 20 dma, which is roughly where the market is today. In other cases, market weakness continued until the index reached the lower BB.

 

 

Is the pullback over? To answer that question, I turn to the catalyst for market weakness. I woke up Tuesday morning to see a sea of red in equity market indices. The spark was attributable to a decline in the shares of go-go stock Palantir, which reported sales and earnings beats and guided expectations higher. Apparently, it wasn't enough. The market sold off because of Palantir's sky high valuation.

 

I found the explanation vaguely unsatisfying. Here is the real reason.

The full post can be found here.

Prepare for the Year-End Rally!

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.

 

Risk Appetite Normalization

Last week, I observed that the stock market was on the verge of a buy signal. I got that signal this week when the VVIX, or the volatility of the VIX Index, dipped below 100 after a spike. This is a signal of reduced market risk appetite anxiety, which sets the stage for a market advance. In the meantime, the S&P 500 has been rising in a well-defined channel.

The full post can beo fund here.

Making Sense of the Gold Price Retreat

I received considerable feedback to last week’s publication, Ready for the Contrarian Gold Trade? I suggested that while gold remains in a long-term bull market as the market is transitioning to a hard asset cycle, gold prices are due for a multi-month period of consolidation and pullback much like the 2004–2006 episode.

Further discussions with readers prompted us to offer an alternative scenario of a shorter corrective period. Investors may not have to wait 1–2 years before the resumption of a gold bull.

The full post can be found here.