Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The “Ultimate Market Timing Model” is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The Trend Asset...
After last week's wild market swings, it's time to have a sober discussion about risk control. I know that risk control isn't a sexy topic, but better portfolio risk control can lead to better overall returns. The framework of analysis will not be the conventional description of risk as it is stylistically shown...
Now that 2020 has come to an end, it's time to deliver the Humble Student of the Markets report card. While some providers only highlight the good calls in their marketing material, readers will find both the good and bad news here. No investor has perfect foresight, and these report cards serve to dissect the...
Mid-week market update: To paraphrase Emperor Hirohito when he broadcast the Japan's decision to surrender in World War II to the nation, "My inner trader's returns have not necessarily developed to his advantage in 2020". While the trading system was correct in spotting the major downdraft this year and the initial recovery, it was wrong to...
Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...
Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...
I just wanted to put out a quick note this morning. The markets are obviously very chaotic this morning and they have taken on a risk-off tone. The VIX Index has spiked above its upper BB, and its term structure has inverted. Both are indications of high fear. Should traders step in and...
Mid-week market update: Normally, this is the time I write a mid-week market update. I arrived back home last night from my vacation after celebrating two New Year's Eves. We celebrated NYE when we connected through Taipei just as we boarded our flight home, and we arrived on the night of December 31 after crossing...
As regular readers know, I have been an advocate of taking an overweight in cyclical exposure in equity portfolios (for the latest update, see Adventures in banking). While I continue to believe that the approach is sound, the reality has been less than fully satisfactory in the US. Among the cyclical groups, the semiconductors are...
I was not at my desk and out at some meetings on Monday. When I returned near the end of the day, I nearly fell off my chair when I saw the VIX Index had spiked above its upper Bollinger Band again, indicating an oversold market. Is the market oversold? Again? So soon?...
Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...
Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade. The...
Mid-week market update: Last week's upside breakout through resistance was impressive. Since then, the market has consolidated above the breakout level, but a FOMO (Fear Of Missing Out) rally has yet to materialize. In the past, such surges have been accompanied by a series of "good overbought" 5-day RSI readings, signs of buying stampedes from...
A reader alerted me to a CNBC report of a bullish analysis by Bespoke's Paul Hickey: Bespoke Investment’s Paul Hickey believes a market hot streak is unfolding. The independent market researcher is building his bullish case by zeroing in on the Citi Economic Surprise Index, which is built to measure optimism in the economy. In...
Marketwatch recently reported that Morgan Stanley's Business Conditions Index had deteriorated to levels last seen during the 2007-08 financial crisis. Wow! Is this an alarming signal, or contrarian? In reality, it was a lesson for data analysts in quantitative analysis. Looking for confirmation When I see a surprising result, I look for confirmation....
Value investing has taken it on the chin in the last decade, as the style has badly lagged the market. Callum Thomas documented how value discount has grown over the last decade. The discount has fallen to levels last seen at the height of the NASDAQ Bubble, when internet related stocks came crashing to earth,...
Mid-week market update: Since my publication detailing the Zweig Breadth Thrust buy signal (see A rare "what's my credit card limit" buy signal), I have been inundated with questions about the possible twists and turns of the market after such a signal. I discussed this issue extensively in 2015 (see The Zweig Breadth Thrust as...
Last week, Donald Trump tweeted his dissatisfaction with General Motors' decision to close four US plants. I feel his pain. Indeed, wage growth in Old Economy industries have been stagnant for quite some time. The WSJ wrote an editorial in response: President Trump believes he can command markets like King Canute thought he could...
The CBOE Short-Term Volatility Index (VXST) measures volatility over a 9-days. In effect, it's the 9-day VIX, which measures 1-month volatility. VXST closed at 21.17 last week. indicating that the market expects an annualized volatility of 21.17% over the next 9-days. When I translate that to a weekly volatility by taking the 52nd root...
Ed Yardeni recently highlighted the surge in small business confidence, earnings and employment plans as part of a scenario of what could go right. Beneath the surface, there were a number of contradictions that were evocative of official Chinese economic statistics. A confidence bifurcation The first problem is how consumer and business confidence is...
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