Equity investors face losses from large corrections and bear markets. Hedging the risks has become challenging in recent years due to market regime changes.
In the Weekly Price Action Lab Report for October 23, 2023, I wrote:
For equity investors, there is a way to protect wealth, which, along with the risks, will be the subject of a premium article next week.
In a recent article, I discussed how cash is the most robust equity portfolio hedge. Specifically, I claimed that:
- Bonds are not a hedge
- Gold is not a hedge
- Market diversification is not a hedge
- Managed futures are not a hedge
- Put options are an expensive hedge
- Strategy diversification is not a hedge
I provided examples in the quoted article to back my claims. I then wrote:
[S]imple market timing methods can produce a superior hedge and performance. In another article, I will discuss some simple but robust methods of market timing.
I have already included an analysis of simple timing functions in another premium article. In this article, we consider a practical filter and discuss the risks and ways of minimizing them.
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Specific disclaimer: This report includes charts that may reference price levels determined by technical and/or quantitative analysis. No charts will be updated if market conditions change the price levels and/or any analysis based on them. All charts in this report are for informational purposes only. See the disclaimer for more information.
Disclaimer: No part of the analysis in this blog constitutes a trade recommendation. The past performance of any trading system or methodology is not necessarily indicative of future results. Read the full disclaimer here.
Charting and backtesting program: Amibroker. Data provider: Norgate Data
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