Welcome to my first Member post!
We are starting this adventure together at a very important time!
Market developments last week were very interesting indeed. The Risk On-Off Model gave sells on both Daily and Weekly time-frames, taking positioning to 80% defensive from equities into TLT. At the same time the Counter-Trend Models gave buys in both time-frames, resulting in a net wash, IE: we have done nothing to alter positions. YET.
But what has happened, is to take equity longs from positioning longs for the long term into trading longs for the short term. Basically, the models have told us that the market will make a bounce first. Counter-Trend Model longs will sooner or later be exited (probably in the next 15 days), while it is terribly unlikely (but always possible) that the main model will again move to Risk On. Why do I say that? Because the damage done to the scores of the model is now worse than the damage that was done in February of this year. Model scores are hovering just around zero, while in February they never crossed below 44. This is very reminiscent of early 2007 or mid 2013 behavior. The spread asset class relationships are breaking down at a faster pace than price…and that is exactly what the model was designed to anticipate.
The Models this year have been whipped around, which is what one would expect at a very late stage of a secular market rally. Topping of the stock market is a process, not an event. This process lasts many months and has many false starts. In essence this is exactly what one should expect. But once the true trend establishes itself, returns will again go to above normal, whichever asset class is the eventual winner.
The Allocation Model also switched out of equities into TLT, re-enforcing the Risk Off bias. As a result, my personal positioning, which I will share with you every day is as follows:
A more detailed review of my expectations can be found in this video: https://youtu.be/4x1omjrkNdM