The following article updates the diffusion index, recession slack index, aggregate recession model, and aggregate peak-trough model through July 2014. Please note that two new explanatory variables were added to the Trader Edge Recession Models in July. For more information, please see "Two New Improvements to Trader Edge Recession Models."
The July 31, 2014 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
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This article presents the Trader Edge aggregate neural network model forecast for the July 2014 non-farm payroll data, which is scheduled to be released tomorrow morning at 8:30 AM EDT.
Readers repeatedly ask me for book and article recommendations, especially new traders who are interested in learning more about trading and investing. Here are four new book recommendations from my personal finance library, all written by Jack D. Schwager. A complete list of all past recommendations is available on the Recommended Reading page.
After personally suffering the costly effects of ECRI's notoriously ill-advised recession call in 2012, I embarked on the journey to create my own recession models. Since developing the initial models in late 2012, I have published the model forecasts shortly after the end of each month. As I learned more about the art of forecasting recessions (and market peaks and troughs), I have incorporated a few improvements to the models.
The structure of the models makes it very easy to incorporate new explanatory variables, so I am always on the lookout for new data series that are causally related to recessionary environments. I recently discovered two new data series, which will be incorporated into the Trader Edge recession models going forward.
The following article updates the diffusion index, recession slack index, aggregate recession model, and aggregate peak-trough model through June 2014.
This article presents the Trader Edge aggregate neural network model forecast for the June 2014 non-farm payroll data, which is scheduled to be released tomorrow morning at 8:30 AM EDT -- one day early due to the fourth of July on Friday.
Overcome the Odds
I heard something remarkable this morning that reminded me just how ill-suited the human brain is for making investment decisions. The inherent decision-making deficiencies that we all share are well documented in decades of behavioral economics and behavioral finance studies, but we have reached a new low.
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