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Weekly Signals Update – August 3, 2020 [Premium Signals]

Open positions, new signals and year-to-date performance of six trading strategies in weekly timeframe.  Commentary about the strategies and market is included. Access to article requires Market Signals subscription.

Weekly Recap

  • Average year-to-date return of all strategies is slightly positive.
  • All strategies gained on the week, including equity long/short.

Comments

Year-to-date, the average return of the strategies is +0.2% while S&P 500 index is up +1.2%.

ETF4RW strategy gained the most on the week due to GLD rally and gains in TLT. Year-to-date return of the strategy is +11.8%.

Dow 30 mean reversion benefited from the rally in AAPL (+13.4% from open to close of the week) but weekly gains were limited due to a 6.5% loss in INTC.

Despite the choppy markets, Dow 30 long/short is up +4.5% year-to-date.

Note that strategies are slightly in the black year-to-date due to the ability of some of them to forecast market direction correctly, while the S&P 500 is up 1.2% due to enormous stimulus and support from central banks, politicians and passive funds. Obviously, we would like to see better performance and we are looking for ways of improving forecasting ability and performance in the future.

The S&P 500 appears overextended but not overbought yet in the daily and weekly timeframes according to our proprietary momentum indicators.There is higher probability of a test of all-time highs in the index in the next few weeks although there is also possibility of another top formation around those levels and a large pullback.

There have been some changes in market dynamics recently due to the influx of a large number of discretionary retail traders who are enjoying temporary winnings but eventually are destined to lose on the average because the market ultimately rewards edges, consistency and patience rather than reckless speculation. But this process may be slow and along the way it may distort traditional indicator signals and some strategies may be thrown out of whack.

Positions as of close of 07/31/2020

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