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Systematic Trading Update – July 17, 2023 [Premium Signals]

Photo by Alesia Kozik

The weekly systematic trading reports include a market recap, open positions, new signals, and the performance of six 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 (July 10 – July 14, 2023)

All assets rallied on the back of the US dollar’s debasement. Debasing the dollar has been the easy path to higher asset prices in the last three decades, at least, but at the risk of boom and bust cycles. The policy works when short-term objectives are more important than long-term ones. The policymakers are not much impacted by the boom and bust cycles they create.

The objective of policymakers has been to sell as much crude oil as possible from the strategic reserves to lower inflation. This strategy has been successful, with a significant reduction in headline inflation, but the core remains elevated. There are risks, and one is that replenishing the reserves could push prices even higher during a crude oil market uptrend, which could lead to even higher inflation. However, kicking the can down the road is the current policy.

Last week, I wrote:

In the late 1970s, stocks made new highs after an initial decline, even as inflation rebounded. The discounting mechanism is highly non-linear, and most forecasts have low significance due to market complexity.

Many macro analysts are stunned by the failure of their models, which were predicting a recession and lower equity prices. The stock market appears determined to make all-time highs, and market makers are looking forward to taking stop-losses above all-time highs. For those who spend time on social media, it is clear that a tiny percentage of the accounts who appear as finance professionals understand markets; most are marketing people. They are recycled often. After the next bust, another army will replace the failed ones.

Strategies are underperforming, but they are the only way to deal with irrational exuberance. Discretionary trading based on anything, macro or technicals, is another way. Many have tried, but few have survived. Many market participants feel smart and think they can profit from market makers in a game they do not control. The market reality is unforgiving.

2. Ensemble Performance

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

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