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Weekly Signals Update – November 29, 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 holiday-shortened week down 2.3%. Commodities (DBC) dropped 3.9% due to a sell-off in crude oil. Gold (GLD) fell 3.3%. Bonds (TLT) gained 1.5%. DBC is up the most (+36.3%) year-to-date while GLD is down the most (-6.5%.)

Last week I wrote:

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

Financial media and traders in social media offered several “explanations” for the stock market sell-off on the last day of the week. Financial media needs to create narratives in search for clicks. Many traders try to identify cause and effect. Experienced traders know that what counts is the process and risk management; the narratives and causes are irrelevant. You can never know the true drivers that power the actions of traders and especially of the funds that move prices.

The goals of most traders and also investors include maximizing returns while minimizing volatility of equity. This is a difficult problem and not many understand the details.  There are conflicting views and objectives, often tied to the products everyone tries to sell, from books to shares in funds and this is reasonable. Some may argue diversification is an exercise in futility because they are promoting other types of hedges. In fact, bonds fully hedged the sell-off of the last day of the week: SPY ETF fell 2.2% while TLT ETF rose 2.5%. “But it may not work in the future” some may claim. The same holds for any scheme they may be promoting or for any other possible scheme. Uncertainty and non-stationarity are market features because without those there would be no markets and no price discovery. It’s puzzling so many don’t understand this. Anyone looking for returns about the risk-free return must accept this fact and learn how to live and operate with it.

Last week a reference was made to new strategy additions for next year.

 We may introduce a timing strategy for trading stocks and bonds… [and] another strategy for NASDAQ-100 stocks.

Any new strategies will fit in the broader scheme of maintaining low variance of returns while maximizing performance as much as possible.

Strategy positions and performance as of close of Friday, November 26, 2021.

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