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: -0.82%
This week, the equity of the equally weighted strategy ensemble fell 0.82%.
Year-to-date performance (Backtest, no leverage)
| YTD Return | YTD Maximum Drawdown | Weekly Change | |
| Strategy ensemble | +13.6% | -2.5% | -0.8% |
| Invesco RSP ETF | +16.1% | -5.6% | -1.7% |
| SPDR SPY ETF | +24.4% | -5.4% | -2.1% |
On a risk-adjusted basis, the ensemble outperforms both the SPY ETF and its equal-weight counterpart, the RSP ETF.
2. Recap and Comments (November 11–November 15, 2024)
This week, as stocks, bonds, and gold fell, the strategies’ performance varied. Despite a loss of 2.1% for the S&P 500 total return (SPY), the ensemble ended the week with a 0.82% loss, primarily due to the two mean reversion strategies, MRSPYW and MRDOWW, being out of the market after closing open positions at the open of Monday, November 11, 2024.
The systematic asset allocation (TFD3M) and asset cross-sectional momentum (ETFNRW) experienced losses of 2.3% and 2.6%, respectively. Despite a small loss of 0.4% of the sector cross-sectional momentum strategy (DMSRM), small gains for SPY and Dow-30 mean-reversion after exiting positions, and a nearly flat performance for Dow-30 long-short, the performance for the week was negative.
Although the Dow-30 stocks long-short strategy did not yield significant convexity this week, the ensemble still benefited from a flat performance. Last week, we wrote:
Although it may seem counterintuitive, a long-short strategy, due to its low beta with the market, smooths returns. For example, during fast crashes, the long-short strategy usually outperforms and may provide a solid hedge, which helps limit drawdowns and equity volatility.
At times, cash can be considered one of the most effective hedges. See this article for more details.
Again, we remind new subscribers that the objective of the strategy ensemble is to generate high risk-adjusted returns, not to outperform the market. Due to lower volatility, the ensemble can provide alpha through the use of leverage. We believe that leveraged beta is the only alpha possible in markets at this time. These markets make pure alpha (skill) difficult due to algorithmic trading, crowded trades, and higher efficiency. Futures trend-following still has the potential to provide alpha, but the need for high discipline has replaced the skill requirement.
3. Positions and strategy performance: Friday, November 15, 2024
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Charting and backtesting program: Amibroker. Data provider: Norgate Data
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