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 30 – February 3, 2023)
Stocks (SPY) began the week with a 1.2% loss on Monday, rebounded 4% over the next three days, and then declined 1.1% on Friday after a stronger-than-anticipated jobs report to end the week up 1.6%. Implied volatility, as measured by the VIX, decreased by 1%.
Long-duration bonds (TLT) gained 1.7% during the first four trading days of the week, but declined 1.5% on Friday due to strong employment data, resulting in a 0.2% weekly gain. Commodities (DBC) saw a 4.7% decline due to strong losses in energy and precious metals. The commodities declines were precipitated by a 1.2% weekly increase in the U.S. dollar (UUP). All world ex-US equities (VEU) fell 1.1% as the US dollar rebounded.
All world equities ex-USA (VEU) have gained the most year-to-date (+8.2%). Long-term bonds (TLT) and stocks (SPY) are up 7.4% and 7.4%, respectively. The DBC ETF is down 4.2%.
Volatility has increased in all markets. Tech stocks (QQQ), which are up 15% year-to-date on expectations of rate cuts, have been the primary engine of the equities rise. These expectations could be based on wishful thinking. Attempting to predict the short-term direction of markets using fundamentals is futile. The markets are very complex non-linear stochastic dynamic systems, and the upper limit of short-term forecasting accuracy is 50%. Due to confirmation bias, many forecasts are worse than random, and the probability of suffering substantial losses is high. A balanced mix of strategies can help to reduce the risks associated with high levels of uncertainty.
3. Ensemble Performance
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Charting and backtesting program: Amibroker. Data provider: Norgate Data
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