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: 2%
This week, the equity of the equally weighted strategy ensemble gained 2%.
Year-to-date performance (Backtest, no leverage)
| YTD Return | YTD Maximum Drawdown | Weekly Change | |
| Strategy ensemble | +14.4% | -2.5% | +2.0% |
| Invesco RSP ETF | +18.1% | -5.6% | +4.4% |
| SPDR SPY ETF | +27.0% | -5.4% | +4.8% |
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 4–November 8, 2024)
Update: As of Friday, November 8, 2024, Nvidia (NVDA) and Sherwin-Williams (SHW) replaced Intel Corp. (INTC) and Dow Inc. (DOW) in the Dow-30 index. The two strategies that generate signals for Dow-30 stocks, MRDOWW and DOWWN, now account for these changes.
All strategies experienced gains this week, with the exception of the Dow-30 long-short strategy. The average gain of the six strategies was 2%.
As already mentioned last week, we are thinking of replacing the strategies that generate signals for stocks next year with ones that use ETFs only. Company-specific risks are increasing in a fast-moving tech world. In fact, the inclusion of NVDA in the Dow-30 reinforces this view. Another alternative could be focusing only on low-beta stocks. We will announce the decision next month.
The objective of the strategy ensemble is to generate reasonable returns in a “comfortable” risk zone. There is potential for generating alpha from leveraged beta, but this is not a strategy we favor. We believe that leverage is suitable only for professional traders, not those who are looking for reasonable risk-adjusted returns. However, opinions on the subject vary.
The ensemble includes a long-short strategy for Dow-30 stocks that fell this week. Note that this is normal behavior. When there are strong upside reversals or rallies in the market, short positions lose more than long positions gain. Why is this strategy included in the ensemble? 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.
Nevertheless, subscribers have the choice to ignore the long-short strategy and focus only on a set of strategies they feel align with their objectives.
3. Positions and strategy performance: Friday, November 8, 2024
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Charting and backtesting program: Amibroker. Data provider: Norgate Data
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