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 Market Outlook
3. Positions and Performance of Strategies
4. Signal Summary for Next Week
1. Performance of the ensemble and benchmarks
Weekly return of the ensemble: +0.7%
This week, the equity of the equally weighted strategy ensemble gained 0.7% to new highs for the year.
Year-to-date performance (Backtest, no leverage)
| YTD Return | YTD Maximum Drawdown | Weekly Change | |
| Strategy ensemble | +16.0% | -2.5% | +0.7% |
| Invesco RSP ETF | +20.3% | -5.6% | +1.1% |
| SPDR SPY ETF | +28.0% | -5.4% | +1.2% |
On a risk-adjusted basis, the ensemble outperforms both the SPY ETF and its equal-weight counterpart, the RSP ETF. At 2x leverage, the strategy ensemble outperforms the S&P 500 total return this year on both an absolute and risk-adjusted basis.
2. Recap and market outlook (November 25–November 29, 2024)
In the holiday-shortened week, stocks (SPY) gained 1.2%, and bonds (TLT) rallied 4%. Commodities (DBC) and the US dollar (UUP) fell 1.9% and 1.6%, respectively. The strategy ensemble ended the week with a gain of 0.7%, mainly due to a rebound in the performance of tactical asset allocation (TFD3M) and solid performance from sector cross-sectional momentum (DMSRM).
Systematic traders rarely fall into the cognitive dissonance trap of trying to rationalize market price action. Although the TLT ETF surged 4% this week, pretending to comprehend the reasons for the move is probably due to cognitive biases and delusions rather than sound analysis. While some analysts are more skilled than others and may have mastered this art and science, the expectation from attempting to understand a highly non-linear system ultimately converges to zero, even in the best-case scenario.
We are thinking of making a few changes to the strategies for next year, but we have not decided yet. Systematic traders should not adjust their strategies often; otherwise, they end up no different than discretionary traders, and even in some cases, any reference to strategies is a cover for that. Discretionary trading based on market analysis and attempting to understand the perspectives of central bankers, politicians, and large market players is a fruitless endeavor. Social media and blogs only celebrate success, luring people into the game. Systematic trading treats gains and losses the same way: they are part of the game, and as long as the expectation remains positive and the risk-adjusted returns are reasonable, then leverage might provide compounding over the years. This is the objective of the weekly market signals. At 2x leverage, the strategy ensemble outperforms the S&P 500 total return this year on both an absolute and risk-adjusted basis.
3. Positions and strategy performance: Friday, November 29, 2024
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Charting and backtesting program: Amibroker. Data provider: Norgate Data
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