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Systematic Trading Update – June 21, 2022 [Premium Signals]

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

In observance of JuneteenthU.S. securities exchanges will be closed on Monday, June 20, 2022.

For more information on the strategies, see here.

Market Recap and Comments (June 13 – June 17, 2022)

This week was marked by liquidation in most asset classes. Stocks (SPY) plunged 5.7%. Commodities (DBC) dropped 5.2%. Gold (GLD) was down 1.7%. Bonds (TLT) fell 1.5%. High Yield Corporate Bonds (HYG) lost 2.1%.  Year-to-date, DBC is up 37.9%. TLT is down the most, with a loss of 23.8%.

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. -1.8%
Average weekly performance of the five strategies (excluding long/short) -0.7%
Weekly change of S&P 500 index -5.8%
Average YTD return including the long-short before the pause. -3.2%
Average YTD return excluding the long-short. -3.9%
YTD return of the S&P 500 Index (no dividends) -22.9%
YTD return of 60/40 portfolio in SPY/AGG (annual rebalancing) -18.0%
YTD return of PSI5 mean-reversion algo (performance for SPY, QQQ, and IWM) -7.4%

The Dow 30 long-short strategy was paused on March 7, when the positions were closed due to the activation of a volatility switch. The strategy without the optional switch gained 2.2% last week. A short position in CVX with a gain of 13.5% contributed most to the long-short gains.

Weekly performance of Dow 30 long-short strategy. +2.2%
Average weekly performance of the six strategies (including long-short) -0.2%
Average YTD return including the long-short (no pause) -2.9%

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 (optional) pause mode due to high volatility. Only two momentum strategies have open positions.

Risk happens fast, and it is difficult to respond if there is no plan. The S&P 500 has fallen 10.5% in the last two weeks and is now in a bear market. There is extreme weakness in fixed income markets, and we just saw this week the first signs of a possible trend reversal in commodities. Unrealized gains may evaporate and even turn into realized losses. This market environment is challenging, and macro and technical analyses are nothing more than narratives used to confirm biases.

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

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