Market recap, open positions, new signals, and performance of six trading strategies. Tactical asset allocation, mean-reversion, cross-sectional momentum, and equity long-short. Access the full report with a Market Signals or All-in-One subscription.
- Amazon (AMZN) replaced Walgreens (WBA) in the Dow 30 long/short and mean-reversion strategies.
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Contents
1. Market Recap and Comments
2. Ensemble Performance
3. Positions and Performance of Strategies
4. Signal Summary for Next Week
1. Market Recap and Comments (February 20–February 23, 2024)
The ensemble of the six strategies gained 1.2% this week. Dow 30 long-short had a strong comeback with a 1.2% weekly gain, and Dow 30 mean-reversion continued to outperform with a gain of 1.6% for the week.
Nvidia (NVDA) earnings and a weekly gain for the stock of 8.5% more than compensated for worries about a trough in inflation and analysts pushing back expectations for Fed rate cuts. Some analysts have started to question whether any cuts will be appropriate this year.
Large-cap stocks (SPY) gained 1.7% for the week. The equal-weight S&P 500 ETF (RSP) finished the week with a gain of 1.2% as market breadth improved slightly. International stocks (VEU) ended the week with a gain of 1.6%.
The bond market initially came under pressure in the holiday-shortened week but rallied on Friday. The TLT ETF gained 1.2%. The DBC ETF fell 1.3%, primarily due to losses in crude oil and grains. Gold (GLD) was up 1.2% for the week, and the US dollar (UUP) fell 0.2%.
Since January 2022, the SPY ETF has been up 10.3%, but with a maximum drawdown of 24.5%, and has matched the performance of gold (GLD). Note that TLT is down 33.7% in the same period.
Is this a bubble market? Is it normal when the most liquid stock market in the world depends on a few tech stocks to avoid a correction and maintain its uptrend? We raised these questions in this article. We cannot predict the future. All we can do is follow strategies. We will probably underperform popular benchmarks, but when the time for a correction comes, we have good chances of outperforming on a risk-adjusted basis.
2. Ensemble Performance
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Charting and backtesting program: Amibroker. Data provider: Norgate Data
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