The performance report has been re-done in order to provide you with better readability and higher consistency among the various setups. Furthermore the trade statistics will have one additional piece of information: Sharpe ratio of trades. Usually Sharpe Ratio is calculated based on an equity curve (daily returns).
As we are not looking at a complete trading systems, i decided to take the Sharpe Ratio of trades. That piece of information should indicate the consistency of a given setups and resulting trades. Sharpe ratio of trades is defined as: annualized average percentage return of trades divided by annualized standard deviation of returns (trades).
Price Action / Benchmark
- Direction: long term up, intermediate-term up
- Volatility: very low
- Trend: intermediate term trend is stretched, though not exhausted
- Channel: position lower part
Ad-Hoc setup (F) is somewhat bearish. I tested many other setups in combination with RSI(3)>90, but haven’t found a bullish case.
Intermediate-term correlation remains low (J-K).
Seasonality is bullish for (G-I).
Market Breadth (J) is up, though significantly overbought on intermediate-term levels.
XLI (Industrials) and XLF (Financials) continued it’s leadership (M). For the setup I considered only weeks where the correlation (sector ETF vs SPY) is high. Very little meaning can be drawn from this setup.
RISK ON for the bond market (N-O). Generally this is positive for the stock market, especially given the DIRECTION setup.
Last week’s call worked out! The market closed higher than it opened.
The market needs to work of it’s overbought conditions. For the coming week I expect a modest pull-back while Friday’s close is near the close of last week.