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Systematic Trading Update – June 13, 2022 [Premium Signals]

Systematic trading updates include open positions, new signals, and the performance of six trading strategies in the weekly timeframe. Market Signals or All in One subscriptions are required to access the report.

For more information on the strategies, see here.

Market Recap and Comments (June 6 – June 10, 2022)

Stocks (SPY) plunged 5.1%. Commodities (DBC) gained 1.2%. Gold (GLD) was up 1.1%. Bonds (TLT) fell 1.9%. High Yield Corporate Bonds (HYG) were down 3.8%.  Year-to-date, DBC is up 45.5%. TLT is down the most, with a loss of 22.6%.

Below is a weekly performance recap, including year-to-date performance, and a comparison to popular benchmarks and the PSI5 mean-reversion strategy.

Average weekly performance of strategies with open positions. +0.7%
Average weekly performance of the five strategies (excluding long/short) +0.3%
Weekly change of S&P 500 index -5.1%
YTD average return including the long/short before the pause. -2.6%
YTD average return excluding the long/short. -3.2%
YTD return of the S&P 500 Index (no dividends) -18.2%
YTD return of 60/40 portfolio in SPY/AGG (annual rebalancing) -14.4%
YTD return of PSI5 mean-reversion algo (performance for SPY, QQQ, and IWM) -2.8%

Comments about performance, positions, and the new signals report follow below.

Next week, the allocation to strategies will remain at 20%, while 80% will be in cash. Three strategies are out of the market, and the long/short strategy is in pause mode due to high volatility. Only two momentum strategies have open positions.

Last week I wrote:

The stock market is near another important pivot point. While low volatility, value, and high dividend large-cap stocks are holding well, tech and high beta large-cap stocks show signs of further deterioration.

The 5.1% weekly loss in the S&P 500 was the largest since a 5.7% loss for the week ending January 21, 2022. Some traders expected the rebound to continue and were surprised by the heavy selling on the last two days of the week. Trying to forecast short-term moves is difficult, but not impossible. It is also beyond the capabilities of the average trader who looks at charts, listens to the news, and attempts to infer direction using methods with no long-term expectation.

The proper way to understand markets is through the development and implementation of strategies. This is a process that requires hard work and discipline. Speculation leads to losses, and the winners are those who use prudent risk and money management methods.

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