Recession Model Forecast: 08-01-2015

The following article updates the diffusion index, recession slack index, aggregate recession model, and aggregate peak-trough model through July 2015. In January 2015, I created a new explanatory variable for a market-based indicator and I added another new explanatory variable in April 2015, and another in June 2015.

Each of the explanatory variables has predictive power individually; when combined together, the group of indicators is able to identify early recession warnings from a wide range of diverse market-based, fundamental, technical, and economic sources. The total number of explanatory recession model variables is now 21. The current and historical data in this report reflect the current model configuration with all 21 variables.

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." Continue reading

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Alarming Report from ECRI

Given the free-fall decline in worldwide equity markets, any new insight into the global economy is particularly valuable right now. The Economic Cycle Research Institute (ECRI) published a report last week with the rather innocuous title "A Shrinking Trade Pie." Despite the innocent sounding title, the contents of the report were particularly disturbing, especially in light of recent market events. Continue reading

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Dow Theory Sell Signal

Given the dramatic market decline in worldwide equity markets last week, Mark Hulbert's recent MarketWatch column titled "The Dow Theory just flashed a sell signal" was especially timely. Continue reading

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Exploiting Earnings Volatility Featured in Stocks & Commodities Magazine

Exploiting Earnings Volatility

Exploiting Earnings Volatility

My new options book, Exploiting Earnings Volatility: An Innovative New Approach to Evaluating, Optimizing, and Trading Option Strategies to Profit from Earnings Announcements, is featured in the "Books for Traders" section of the current (September 2015) issue of Technical Analysis of Stocks & Commodities Magazine. Stocks & Commodities is one of the best values in educational resources for traders, offering subscribers full access to their entire digital archive.

Exploiting Earnings Volatility introduces a new analytical framework and tool-set for designing, optimizing, and trading option strategies to profit from earnings-related pricing anomalies. Two spreadsheets accompany the book to help readers of all experience levels integrate the concepts into their trading.

If you read the book, please take a few minutes to provide a brief review on Amazon. It would be greatly appreciated.

Thank you,

Brian Johnson

Copyright 2015 Trading Insights, LLC. All rights reserved.

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Negative US Equity Returns Over the Next Decade

In a recent post, I referenced Mark Hulbert's article for MarketWatch that suggested the "Stock market is doomed to rise only 3.5% per year over the next decade."  That may be wishful thinking.

Jesse Felder's recent column titled "The Warren Buffett way to avoiding major bear markets" suggests that US equities are expected to earn a return of only -1.07% over the next ten years! Continue reading

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Scary Long-Term Outlook for US Equity Returns

According to a recent Mark Hulbert article for MarketWatch, the "Stock market is doomed to rise only 3.5% per year over the next decade." I do not put much stock in long-term market prognostications, but I do believe in long-term fundamental analysis - and basic math, and Hulbert makes a compelling case. Continue reading

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

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

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07-31-2015 AAR Strategy Update Posted

The July 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