The weekly systematic trading reports 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 (February 6 – February 10, 2023)
As market participants concentrated on the CPI data this coming week, uncertainty increased in the market. Equities and bonds fell, while the US dollar and commodities gained. These are short-term developments, and the medium-term course is quite unknown and will be heavily influenced by the direction that interest rates and bond yields take in the future.
The implied volatility, as measured by the VIX, increased to 20.53% as stocks (SPY) declined by 1%. As Fed policymakers reiterated their commitment to bringing inflation down to 2%, long-duration bonds (TLT) fell 3.1%. All world stocks except the United States (VEU) lost 1.1% as the US dollar rose. Gains in energy, grains, and softs drove a 3% increase in the Commodities (DBC) index.
All world equities ex-U.S. (VEU) have gained the most year-to-date (+6.9%). Stocks (SPY) and long-term bonds (TLT) are up 6.7% and 4.1%, respectively. (DBC) Commodities are down 1.3%.
Due to solid gains in long Microsoft and Merck and short 3M, the Dow 30 long/short had another good week. The performance of the Dow 30 mean-reversion also slightly improved following a recent streak of negative weeks. Along with the cross-sectional momentum of ETFs, trend-following commodity ETFs experienced small losses.
Due to social media, the frequency of narrative fallacies on the state of the economy and the future trajectory of inflation and interest rates has skyrocketed. In this noise, there is no signal. The only rational approach to the markets is to employ a mixture of strategies. Although far from a panacea, systematic trading may provide some protection in a noisy environment.
2. Ensemble Performance
Below is the weekly performance recap, including year-to-date performance and a comparison to popular benchmarks and the PSI5TF futures trend-following strategy.
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Charting and backtesting program: Amibroker. Data provider: Norgate Data
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