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Systematic Trading Update – January 30, 2023 [Premium Signals]

Photo by Alesia Kozik

The weekly systematic trading updates include a market recap, open positions, new signals, and the performance of seven trading strategies.

Report Contents

1. Market Recap and Comments.
2. Ensemble Performance.
3. Positions and Performance of Strategies.
4. Signal Summary for Next Week.

1. Market Recap and Comments (January 23 – January 27, 2023)

The price action was volatile during the week. Stocks (SPY) gained 1.2% on Monday, took a breather on Tuesday, then fell as much as 1.7% on Wednesday but recovered to close unchanged for the day. The rally resumed on Thursday due to expectations of 25 basis points rate hikes going forward, or even a pivot, and the SPY ETF ended the week with a gain of 2.5%.

Long-duration bonds (TLT) rallied 1.4% on Tuesday but the action was volatile and the ETF ended the week with a gain of 0.5%. Commodities (DBC) fell 1.3% due to losses in natural gas, crude oil, and gasoline. The US dollar (UUP) ended the week slightly higher. All world ex-US equities (VEU) gained 0.9%.

Year-to-date, all world equities ex-USA (VEU) are up the most (+9.4%) and overbought. Bonds (TLT) have gained 7.2%. The US dollar (UUP) is down 1.2% and commodities (DBC) are up 0.5%, with gold (GLD) gaining 5.6%.

Cross-sectional momentum was slightly up on the week, commodities trend-following was flat, and the Dow 30 long-short recovered on Friday from losses of over 1% to end the week nearly flat. Mean reversion was down and continues to act as a drag on returns. We expect the performance of mean-reversion to improve in the next two months.

The rally in equities has gained momentum and stock indexes are approaching crucial resistance levels. Due to high uncertainty, forecasts have low statistical significance, and relying on strategies is one way of navigating an environment with a low signal-to-noise ratio. Although some analysts believe they can forecast the direction of the markets going forward, we believe this is an exercise in futility.

3. Ensemble Performance

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Charting and backtesting program: Amibroker. Data provider: Norgate Data

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