03-31-2015 AAR Strategy Update Posted

The March 31, 2015 AAR Strategy update is now available on the AAR Subscribers page.  If you are not currently a subscriber and would like to learn more about the strategy, there is a detailed description on the AAR Strategy page.

The AAR strategy is a conservative, long-only, asset allocation strategy that rotates monthly among five large asset classes: large-cap U.S. stocks, developed country stocks in Europe and Asia, emerging market stocks, U.S. Treasury Notes, and commodities. The strategy was inspired by the Ivy League portfolio and uses trend and technical filters to reduce downside risk.

If none of the five candidates pass their respective trade filters, the AAR strategy remains in cash for the month.   Stop-loss orders are used on every trade to control losses and to facilitate position sizing and risk management.

Brian Johnson

Copyright 2015 - Trading Insights, LLC - All Rights Reserved.

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Posted in Asset Allocation Rotational (AAR) Strategy, Market Timing, Relative Strength, Risk Management, Strategy Development, Technical Analysis | Tagged , , , , , , | Leave a comment

No New Posts Until April

I am working on the final edit of my new (second) options book. I will post an update here as soon as the new book is available. There will be print and Kindle versions.

Due to the demands of the editing process, there will be no new Trader Edge posts until April. Posts will resume next month with the March NFP model forecast.

Brian Johnson

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Recession Model Forecast 03-01-2015

The following article updates the diffusion index, recession slack index, aggregate recession model, and aggregate peak-trough model through February 2015. I read an article last month about a market-based metric that was indicating a recession. I tested the new indicator and discovered that it had an extensive history, over which it had consistently identified recessionary environments with minimal lag. In addition, none of the other explanatory variables captured this particular market characteristic. As a result, I created a new explanatory variable for the new market-based indicator, bringing the total number of explanatory recession model variables to 19. The current and historical data in this report reflect the current model configuration with all 19 variables.

The beauty of these types of models is that adding new variables does not require re-estimating the coefficients. The models only use historical changes in the diffusion index (the percentage of explanatory variables indicating a recession) and historical changes in the median recession slack index.

In July 2014, two new explanatory variables were added to the Trader Edge Recession Models and one explanatory variable was replaced. The swapped variables measured similar economic data, but the new series had more predictive power and was more forward-looking. For more information on the changes in July 2014, please see "Two New Improvements to Trader Edge Recession Models."

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Posted in Economic Indicators, Fundamental Analysis, Market Timing, Recession Forecasting Model | Tagged , , , , , , , , | Leave a comment

Non-Farm Payroll (NFP) Model Forecast – February 2015

This article presents the Trader Edge aggregate neural network model forecast for the February 2015 non-farm payroll data, which is scheduled to be released tomorrow morning at 8:30 AM EST.

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Posted in Economic Indicators, Market Commentary, Market Timing, NFP Forecasting Model | Tagged , , , , , , | Leave a comment

02-27-2015 AAR Strategy Update Posted

The February 27, 2015 AAR Strategy update is now available on the AAR Subscribers page.  If you are not currently a subscriber and would like to learn more about the strategy, there is a detailed description on the AAR Strategy page.

The AAR strategy is a conservative, long-only, asset allocation strategy that rotates monthly among five large asset classes: large-cap U.S. stocks, developed country stocks in Europe and Asia, emerging market stocks, U.S. Treasury Notes, and commodities. The strategy was inspired by the Ivy League portfolio and uses trend and technical filters to reduce downside risk.

If none of the five candidates pass their respective trade filters, the AAR strategy remains in cash for the month.   Stop-loss orders are used on every trade to control losses and to facilitate position sizing and risk management.

Brian Johnson

Copyright 2015 - Trading Insights, LLC - All Rights Reserved.

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Posted in Asset Allocation Rotational (AAR) Strategy, Market Timing, Relative Strength, Risk Management, Strategy Development, Technical Analysis | Tagged , , , , , , | Leave a comment

No Post This Week

We got hit by an ice storm and are currently without power. As a result, there will be no post this week.

Brian Johnson

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Recession Model Foreast 02-01-2015

The following article updates the diffusion index, recession slack index, aggregate recession model, and aggregate peak-trough model through January 2015. Please note that two new explanatory variables were recently added to the Trader Edge Recession Models and one explanatory variable was replaced. The swapped variables measured similar economic data, but the new series had more predictive power and was more forward-looking. For more information on the two new variables, please see "Two New Improvements to Trader Edge Recession Models."

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Posted in Economic Indicators, Fundamental Analysis, Market Timing, Recession Forecasting Model | Tagged , , , , , , , , | Leave a comment

Sentiment Warning Signal Flashing Red – Again

Many traders use technical and/or fundamental data, but few traders have discovered the unique benefits of using sentiment data in their investment process. Sentiment data attempts to quantify the emotional mood of investors and traders and can be used as a very effective contra-indicator. When traders are complacent and overly bullish, markets tend to pull back. Conversely, when traders panic and emotions are running high, this often indicates a potential bottom and an attractive buying opportunity. The following article presents a unique and troubling sentiment warning signal from a recent proprietary research report from SentimenTrader.

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Posted in Market Commentary, Market Sentiment, Market Timing | Tagged , , | 1 Comment