The weekly systematic trading updates include a market recap, open positions, new signals, and the performance of seven trading strategies. A Market Signals or All in One subscription is required to access the full report.
Report Contents
1. Market Recap and Comments.
2. Ensemble Performance.
3. Positions and Strategy Performance.
4. Signal Summary for Next Week.
1. Market Recap and Comments (September 12 – September 16, 2022)
The week started with a gain of 1.1% for stocks (SPY), and that acted as a bull trap and led to a 4.8% loss for the week. Commodities (DBC) fell 2% on the back of losses in energy, basic materials, and base metals. Gold (GLD) lost 2.5%. High-yield corporate bonds (HYG) shed 2.1% and long-duration bonds (TLT) fell 1.1%. Year-to-date, DBC is up 19.7%. TLT is down the most, with a loss of 26.8%. The US Dollar index (UUP) is up 14.7% year-to-date.
We wrote last week:
There are no indications that any of the main drivers of the stock and bond market decline have been removed. The rally of this week may continue, and bonds at some point will bounce hard, but the medium-term direction of all assets is highly uncertain.
The short-term momentum faded after the release of the CPI number. Stocks (SPY) plunged 4.3% after the release and the rout continued until the close of Friday.
Markets are getting more sophisticated and demand careful diversification and risk management. Traders who use simple technical or macro analysis have no chance in this environment.
The strategies have been flat since the opening of September 6, when the allocation was reduced to 0%, other than for the optional long/short strategy, which has had flat performance since.
The short-term market direction is highly uncertain and we have no forecast or view to offer. We let the strategies decide how to deal with the uncertainty and expect the signals will be robust and diversification will fulfill its goal of a reasonable Sharpe ratio at low volatility. By construction, our strategies do not try to beat the market but provide reasonable risk-adjusted performance.
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2. Ensemble Performance
Below is a weekly performance recap, including year-to-date performance and a comparison to popular benchmarks and the PSI5 mean-reversion strategy.
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