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Market Signals For July 1, 2024

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Market recap, open positions, new signals, and performance of six trading strategies. Tactical asset allocation, mean reversion, cross-sectional momentum, and equity long-short with weekly and monthly updating. New equity highs. Access the full report with a Market Signals or All-in-One subscription.


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

1. Performance of the ensemble and benchmarks

Weekly return of the ensemble: +0.3%

The equity of the equally-weighted strategy ensemble reached new highs this week.


Year-to-date performance (Backtests, no leverage)

YTD Return YTD Maximum Drawdown
Strategy ensemble +8.2% -2.1%
Invesco RSP ETF +4.9% -6.0%
SPDR SPY ETF +15.2% -5.4%

On a risk-adjusted basis, the ensemble outperforms both the SPY ETF and its equal-weight counterpart, the RSP ETF. The ensemble also outperforms the latter on an absolute return basis due to deteriorating market breadth this year.

2. Market Recap and Comments (June 24–June 28, 2024)


Asset performance was mixed during the week, with bonds (TLT) falling the most by 2.3% due to economic reports raising the (low) odds of stagflation. Commodities (DBC), the US dollar index (UUP), and gold (GLD) each gained 0.1%. Large-cap stocks (SPY) fell 0.1%. International stocks (VEU) were up 0.4%. Overall, it was a negative week for fixed-income markets and a mixed one for stocks. This is typical market behavior when growth potential falls but inflation remains above target. The market will focus on the employment report next week for more clues.

Discretionary traders have started complaining that markets have become too erratic. Recency bias contributes to this perception, as markets have historically been mostly erratic, yet traders tend to overlook it when there is a clear trend. This week, the sharp decline in prices on Friday following the PCE report shattered the confidence of fixed-income investors. There were no surprises in the data, leading bond bulls to believe that the report would trigger a rally, but instead, bonds experienced a sharp decline. This serves as another reminder that the consensus’s opinion is not as important as the actions of key players who influence prices. Naturally, analysts overlook this crucial parameter due to its high degree of unpredictability. This is also one reason many astute professionals rely on strategies.

While strategies can also result in significant losses, relying solely on predicting the actions of key participants after a certain economic report is often ineffective and demonstrates a lack of experience. Systematic trading is a continuous struggle with uncertainty, but it is more rational than trying to be a prophet of the markets.

3. Positions and strategy performance: Friday, June 28, 2024

Sector cross-sectional momentum and Dow 30 mean reversion gained 0.6% and 1.4% this week, respectively. The asset cross-sectional momentum strategy had small gains, whereas the Dow 30 long-short strategy finished the week with small losses. There are several new signals for next week.

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

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