The weekly reports on systematic trading include a market summary, open positions, new signals, and the performance of six trading strategies. Access to this report requires a Market Signals or All-In-One subscription.
U.S. securities exchanges will be closed on Monday, September 4, 2023, in observance of Labor Day.
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 (August 28 – September 1, 2023)
For the week, all assets were up except for long-term bonds (TLT), which fell 0.1%. Commodities (DBC) advanced by 1.9% due to gains in energy, precious metals, and basic materials. The US Dollar Index (UUP) added 0.2% after rising for the seventh week in a row. Large-caps (SPY) added 2.6%. Gold (GLD) increased by 1.4%. High-yield corporate bonds (HYG) gained 1.1%, and international stocks (VEU) saw a 2.1% increase.
According to some Wall Street analysts, stocks gained this week because economic data pointed to a slowing economy and the Fed pausing interest rate hikes. Our position has always been that there is a weak link between economic reports and price action in the US equities markets, especially in the medium term. Fear, greed, and reflexivity drive equity markets; demand and supply drive commodity markets; and since the US dollar is a reserve currency, political decisions largely determine its trend.
Due to the weak link between financial news and market price action, investment and trading decisions that rely on the former turn out to be random. Only an ensemble of strategies has the potential to provide long-term positive expectation at a reasonable variance. However, due to erratic price action caused by market participants who make decisions based on financial news and wishful thinking, strategies often underperform benchmarks on a total return basis but can offer potential for leveraged alpha when the variance is low.
Rebalancing of the ensemble should not occur frequently to avoid bias. Our goal is to replace one or two strategies at most every two years. Next year, we plan to replace one strategy, and the final decision will be made by mid-December.
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Charting and backtesting program: Amibroker. Data provider: Norgate Data
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