Wednesday, March 27, 2024
Lucy and the correction football
Sunday, March 24, 2024
This bull run is nowhere near finished
The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. 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 be found here.
- Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
- Trend Model signal: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Bearish (Last changed from “neutral” on 25-Mar-2024)*
Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter 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.
Market structure review
Saturday, March 23, 2024
The investor's cyclical mystery
Copper is a cyclically sensitive metal that was given the moniker of Dr. Copper, because it is said to have a Ph.D. in economics because of its ability to forecast global economic trends. Its recent breakout from a 10-month base excited a lot of people. Similarly, the turnaround in the relative performance of materials stocks was interpreted as a cyclical green shoot.
Therein lies the mystery. Are the markets signaling a cyclical rebound, or not?
Wednesday, March 20, 2024
It's all about expectations
Fast forward a month. The company unveiled its new chip and the market reaction was a thud. In fact, the AI bellwether Semiconductor Index weakened and violated a relative uptrend channel (bottom panel). This was a lesson in expectations, how the market reacted to incoming data, and how expectations evolve.
Sunday, March 17, 2024
The stealth breakout you may have missed
The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. 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 be found here.
- Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
- Trend Model signal: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Neutral (Last changed from “bullish” on 24-Jan-2024)*
Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter 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 convincing breakout at 2100
Friday, March 15, 2024
A reply to Grantham's AI warning
But every technological revolution like this – going back from the internet to telephones, railroads, or canals – has been accompanied by early massive hype and a stock market bubble as investors focus on the ultimate possibilities of the technology, pricing most of the very long-term potential immediately into current market prices. And many such revolutions are in the end often as transformative as those early investors could see and sometimes even more so – but only after a substantial period of disappointment during which the initial bubble bursts. Thus, as the most remarkable example of the tech bubble, Amazon led the speculative market, rising 21 times from the beginning of 1998 to its 1999 peak, only to decline by an almost inconceivable 92% from 2000 to 2002, before inheriting half the retail world!
As much as I respect Grantham’s investment insights, he suffers from the value investor problem of being too early and overly reliant on valuation for his views. I reiterate my view that it’s still early in the bull cycle for AI stocks (see The Path to Magnificent Exuberance). Here’s why.
Wednesday, March 13, 2024
Waiting for the recycle amidst an elevated tail-risk backdrop
I agree. I've been saying the same thing for several weeks. A correction or pullback is on the horizon, but hasn't arrived yet. While signs of technical deterioration are appearing, a sideways consolidation marked by a rolling correction is very possible.
Sunday, March 10, 2024
A Hindenburg Moment for growth stocks?
The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. 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 be found here.
- Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
- Trend Model signal: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Neutral (Last changed from “bullish” on 24-Jan-2024)*
Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter 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.
NASDAQ Hindenburg warnings
I have been concerned about the extended and frothy nature of the advance in growth stocks. Worries came to a head when the Semiconductors Index rallied through and reversed though an upward trending relative performance channel, indicating a possible blow-off top. Beneath the hood, however, market internals are signaling breadth deterioration for NASDAQ stocks that warn of an impending corrective downdraft.
NASDAQ stocks have been flashing Hindenburg Omens starting in January and the warnings continued into February. While the signal isn’t perfect, the history of such clusters in the last 10 years has usually resolved in declines, shown as pink bars), while the instances of false positives (grey bars) have been relatively low.
The full post can be found here.
Saturday, March 9, 2024
Doesn't Fed policy matter to stocks anymore?
The full post can be found here.
Wednesday, March 6, 2024
Mind the gaps
Monday, March 4, 2024
How gold miners could be a refuge from the YOLO and FOMO frenzy
Sunday, March 3, 2024
How to trade the YOLO and FOMO market
The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. 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 be found here.
The latest signals of each model are as follows:
- Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
- Trend Model signal: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Neutral (Last changed from “bullish” on 24-Jan-2024)*
Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter 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 YOLO and FOMO market
Another week, another all-time high for the S&P 500 and NASDAQ Composite. The U.S. market has been infected with the FOMO (You Only Live Once) and FOMO (Fear of Missing Out) sentiment viruses while numerous macro and technical warnings have appeared.As an example, Bitcoin prices have soared. Historically, Bitcoin has been correlated with the relative performance of the ARK Innovation ETF (ARKK), which is a bellwether for speculative growth stocks. This time, ARKK hasn’t risen as much. Is this a positive or negative divergence?
Saturday, March 2, 2024
Are you ready to be a contrarian cigar butt investor?
The full post can be found here.
Wednesday, February 28, 2024
How extended is this market?
Sunday, February 25, 2024
Did the NVIDIA-fueled rally exhaust the bulls?
The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. 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 be found here.
The latest signals of each model are as follows:
- Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
- Trend Model signal: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Neutral (Last changed from “bullish” on 24-Jan-2024)*
Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter 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.
NVIDIA’s week
However, the advance was marred by poor internals. The rally in the S&P 500 took it to the top of its Bollinger Band, but it’s rare that upper BB rides are accompanied by negative RSI divergences and poor participation. Moreover, it’s unusual to see the market rally to an all-time high with the NASDAQ Summation Index flat when it should have been a source of strength.
Saturday, February 24, 2024
The path to Magnificent Exuberance
Signs of technical deteriorations had been appearing last week, but NVIDIA’s earnings report saved the day. The earnings report can best be described as a blowout. The results beat Street expectations on all metrics and the company guided upwards. There wasn’t anything not to dislike about the report. As a consequence, the Semiconductor Index, which is a bellwether for artificial intelligence (AI) related plays, rallied strongly after briefly testing the lower bound of its absolute and relative return rising channels.
Even though some excesses are appearing, I reiterate my view that the AI bubble has far more room to run before it reaches the phase of Magnificent Exuberance (see Why this AI bull is nothing like the NASDAQ in 2000).
Wednesday, February 21, 2024
NVIDIA at the bat
Sunday, February 18, 2024
Are negative divergences necessarily bearish?
The Trend Asset Allocation Model is an asset allocation model that applies trend-following principles based on the inputs of global stock and commodity prices. 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 be found here.
The latest signals of each model are as follows:
- Ultimate market timing model: Buy equities (Last changed from “sell” on 28-Jul-2023)*
- Trend Model signal: Bullish (Last changed from “neutral” on 28-Jul-2023)*
- Trading model: Neutral (Last changed from “bullish” on 24-Jan-2024)*
Update schedule: I generally update model readings on my site on weekends. I am also on X/Twitter 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.
Divergences everywhere
Saturday, February 17, 2024
Is transitory disinflation here to stay?
I’ve discussed the risk of transitory disinflation before, and it manifested itself in the form of hotter-than-expected January CPI and PPI reports. The reports rattled the bond market and expectations of the first quarter-point rate cut has been pushed out from May to June and a slower rate cut trajectory for the remainder of year.
The latest BoA Global Fund Manager Survey showed that only 4% of respondents expect higher rates and 7% expect higher inflation. It was therefore no surprise that bond prices skidded badly in the wake of the CPI report.