The Trend Asset Allocation Model is an asset allocation model that applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can bsoe found here.
My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the email alerts is updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below.
The latest signals of each model are as follows:
- Ultimate market timing model: Buy equities*
- Trend Model signal: Bearish*
- Trading model: Neutral*
Update schedule: I generally update model readings on my site on weekends and tweet mid-week observations at @humblestudent. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of those email alerts is shown here.
Subscribers can access the latest signal in real-time here.
A bear marketThe signs are becoming clear. This is an equity bear market. Global central banks are engaged in a coordinated round of tightening. Fed Governor Lael Brainard put on the table the prospect of quantitative tightening, or a reduction of the Fed balance sheet, in a speech last week. This was confirmed by the release of the March FOMC minutes which revealed the Fed is targeting $95 billion in balance sheet reduction per month. Cue the fears about the effects of falling liquidity on stock prices.
In addition, the hopes that the bulls had for a momentum-driven rally fizzled in late March. The S&P 500, S&P 400, and S&P 600 all stalled at resistance and have all since pulled back.
Here are some ways that traders and investors can find stable and risk-controlled returns in a chaotic bear market.
The full post can be found here.