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: +0.2%
This week, the equity of the equally weighted strategy ensemble increased by 0.2%.
Year-to-date performance (Backtests, no leverage)
| YTD Return | YTD Maximum Drawdown | |
| Strategy ensemble | +14.0% | -2.5% |
| Invesco RSP ETF | +15.4% | -5.6% |
| SPDR SPY ETF | +23.1% | -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 7–October 11, 2024)
All strategies were up slightly this week, except for the Dow-30 mean-reversion, which gained 0.8% and remains the best-performing strategy year-to-date with a return of 25.7%. The average gain of the six strategies was 0.2%.
Last week, we wrote:
Strategies require analytical work. Macro and chart analysis sound exciting due to fancy terminology and a false sense of understanding the markets.
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. In essence, some investors, analysts, and traders believe the Fed objective is to pump stocks higher, and the dual mandate serves as an excuse for doing exactly that. Although this scenario is plausible, we have no way of confirming it. In the event of a stock market correction, the economy will enter a period of turmoil. Therefore, while this scenario may be correct in a counterfactual sense, we cannot verify that pumping the stock market dominates the Fed’s reaction function.
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. In other words, focusing on fundamental analysis is a waste of time or even an excuse for calling for higher equity prices. Usually, fundamental and discretionary investors panic during large corrections caused by exogenous events and sell near the bottom of the market. Exogenous events, such as the pandemic crash, realize the value of strategy ensembles. In the meantime, the ensembles will be underperforming, but this is a feature, not a bug.
3. Positions and strategy performance: Friday, October 11, 2024
|
This post is for paid subscribers
Already a subscriber? Sign in |
Access the full report with a Market Signals or All-in-One subscription. By subscribing, you have immediate access to hundreds of articles. Market Signals subscribers have immediate access to hybrid asset allocation and dynamic momentum monthly signals and more than two hundred articles in the Premium Education section, and All in One subscribers have access to all premium content (except daily mean-reversion signals.)
Charting and backtesting program: Amibroker. Data provider: Norgate Data
Disclaimer: The Premium and Weekly Signals are provided for informational purposes only and do not constitute investment advice or actionable content. We do not warrant the accuracy, completeness, fitness, or timeliness for any particular purposes of the Premium and Weekly Signals. Under no circumstances should the premium or weekly signals be treated as financial advice. The author of this website is not a registered financial adviser. Before subscribing, please read our Disclaimer and Terms and Conditions.
Copyright notice: Any unauthorized copy, reproduction, distribution, publication, display, modification, or transmission of any part of this report is strictly prohibited without prior written permission.
