Blow Off Top?
Getting a read of the current markets
— Just a reminder that “these final moves” is an assumption. The market could go up for another 2 years before any “crash”. If we assume this is a “final move” then we may miss out on what the market might give us. Best to let the market tell us what is actually happening vs. assuming what part of the cycle this is. —
OK I get it.
I write this before Trump speech. And as of now some of the indices look insane, but are they?
Well, at this point this is overbought by any means. Check the Dow Jones.
However
Markets can go higher than we all think. And that’s the main idea behind Dual Momentum.
However (part II)
As the Tape was horrible and all that I issueed a risk off signal on 21/07. You can check my substack and see all the reasons.
I wanted to position defensive before a possible crash. If there was any to happen that was the time.
Why? Because I already have my own bear market indicators, but they could take some time to react.
So that’s just giving up returns for seeking extra protection, but these risk off signals should not be common anyway and it’s just me evaluating the market health before it is too late and I give back a lot.
Now
The news flow dominate again and the markets are volatile.
The AI trade is lagging and doesn’t offer alpha just beta (volatility). And this includes the Nasdaq Index. That is a crowded trade.
The summer stall may just have be gone or I am writting this as the market tops. Given my recent luck that’s a possibility.
The S&P 500 is +13% YTD. I continue to expect volatility ahead.
IWM +22% and still have more upside.
Some Lessons I just have to repeat to myself
Is not about being a permabull - The market will have terrible drawdowns at some point. That’s how it goes, but we don’t know when.
It’s more about when you follow your rules and when you break them.
And Focus on avoiding costly mistakes such as undiscipline, leverage…
I will talk deeply on this in the coming days. I think running this Substack on a daily basis made me a way better trader.
What I currently am doing?
Well here you can see two of my Dual Momentum systems sitting in a Drawdown.
I’m more than pleased to buy them during Drawdowns.
Remember, I am not buying a stock that goes down. I am buying a dual momentum system that just underperformed recently and that averages +-12% annually.
Right now my portfolio is:
50% DBC - Broad Basket of Commodities
50% IWM - Small Cap Index
So that’s already hedged given recent correlations unless something changes.