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Weekly Signals Update – November 22, 2021 [Premium Signals]

The weekly systematic trading reports include open positions, new signals and year-to-date performance of seven trading strategies. Access to report requires Market Signals or All in One subscription. 

Market Recap and Comments

Stocks (VTI) finished the week down 0.1%. Commodities (DBC) fell 2.3% due to a sell-off in crude oil. Gold (GLD) retreated 1.1%  as the US dollar rallied. Bonds (TLT) gained 0.7%. DBC is up the most (+41.8%) year-to-date while TLT is down the most (-4.7%.)

Note that U.S. Securities Exchanges will be closed on Thursday, November 25, 2021. In addition, on Friday, November 26, many securities exchanges will be closing early.

A holiday stock market rally is possible early next week. However, this is not always the case in the past.

As another year is coming to an end, we are already working on introducing new strategies. We may introduce a timing strategy for trading stocks and bonds to replace the ETF2RW that was deactivated because its signals overlapped with those of other strategies. We may also introduce another strategy for NASDAQ-100 stocks. Our objective here is using strategies that minimize drawdown and provide a reasonable Sharpe ratio. We do not plan to have strategies that are subject to high drawdown levels as some other signal services do. Occasionally impressive performance often comes at high drawdown levels and imposes a drag on returns.

There are some services that offer signals with strategies that have Sharpe ratio comparable to that of buying and holding the S&P 500 and although returns may be impressive during some years, the drawdown can get too large. Those strategies usually look good in long-term backtests but no one can go back in time. Those who start using them near equity peaks may face significant drawdown in excess of 30%. The time-domain average performance depends on the time someone starts considering the signals and not on the backtest performance. This is why a smooth equity curve is much more important than a fast rising but volatile equity curve. The former type of equity curve is the objective of these reports.

Strategy positions and performance as of close of Friday, November 19, 2021.

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