Market recap, open positions, new signals, and performance of six trading strategies. Tactical asset allocation, mean reversion, cross-sectional momentum, and equity long-short with weekly and monthly updating. Access the full report with a Market Signals or All-in-One subscription.
Contents
1. Performance of the Ensemble and Benchmarks
2. Recap and Comments
3. Positions and Performance of Strategies
4. Signal Summary for Next Week
1. Performance of the ensemble and benchmarks
Weekly return of the ensemble: +0.6%
This week, the equity of the equally weighted strategy ensemble increased by 0.6% to new, all-time highs for the year.
Year-to-date performance (Backtests, no leverage)
| YTD Return | YTD Maximum Drawdown | |
| Strategy ensemble | +14.7% | -2.5% |
| Invesco RSP ETF | +16.7% | -5.6% |
| SPDR SPY ETF | +24.2% | -5.4% |
On a risk-adjusted basis, the ensemble outperforms both the SPY ETF and its equal-weight counterpart, the RSP ETF.
2. Recap and Comments (October 14–October 18, 2024)
All strategies were up this week except for the Dow-30 long-short. The average gain of the strategies was 0.6%.
Last week, we wrote:
The stock market continues to discount all adverse developments and is making new all-time highs because investors are convinced the Fed will support the market… If the scenario of a “fed put” is true, then only an exogenous adverse effect will cause a stock market correction, and fundamentals are irrelevant.
Fundamentals have become even more irrelevant, and macro analysis is in disarray. For example, macro analysts have only recently started to notice the move in gold, although strategies have taken advantage of the breakout since March of this year. Specifically, our ETFNRW strategy has maintained a long position in the IAU since the week ending March 8, 2024. Strategies work quietly and in the background, whereas macro analysis makes noise, and there is fierce competition who is going to be right. The market dislikes this type of arrogance, and historically, macro analysis has not been effective due to long lag and biases.
The market’s complexity surpasses the scope of linear thinking. Most strategies, even the simpler ones, exhibit some rudimentary non-linear behavior, which can become quasi-adaptive under suitable market conditions. Most of the time, macro analysis fails to adapt due to prevailing biases such as wishful thinking and confirmation. Biases also affect strategies, but they do so during the development stage rather than during execution. In other words, strategies have a higher chance of achieving their objectives if they minimize biases during development and have solid economic value.
3. Positions and strategy performance: Friday, October 18, 2024
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Charting and backtesting program: Amibroker. Data provider: Norgate Data
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