Data &
Technology
Research
Reports
Report Solutions
Reports Library
Actionable
Strategies
Free
Resources
Simple Backtest Calculator
Simple Seasonality Calculator
The Kelly Criterion Calculator
Sentiment Geo Map
Public Research Reports
Free Webinar
Pricing
Company
About
Meet Our Team
In the News
Testimonials
Client Success Stories
Contact
Log inLoginSign up
< BACK TO ALL REPORTS

What I'm looking at - more MACD signals, economic policy uncertainty, Baltic Dry Index, copper:gold

Troy Bombardia
2020-01-08

Here's what I'm looking at:


More MACD sell signals

As I mentioned yesterday, more and more stocks within U.S. stock market indices have triggered MACD sell signals in the past 10 days. And this isn't just confined to the U.S. - 59% of the FTSE 100 has experienced MACD sell signals in the past 10 days:

This is an extremely high amount of issues with MACD sell signals, and has only been matched 2 other times from 2002-present:

Both historical cases saw further losses over the next month with a terrible risk:reward ratio. However, it's hard to believe a study with sample size n=2. So if we relax the parameters to increase the sample size:

The FTSE 100's returns over the next month weren't consistently bearish. As I mentioned yesterday, this indicator has been successful at predicting some recent pullbacks, but before that wasn't really effective.


Economic Policy Uncertainty

Political and economic policy uncertainty has been consistently elevated over the past 2 years due to the global economic slowdown and ongoing trade war. But now that the narrative has shifted towards the potential for an economic rebound and a de-escalation of the trade war, uncertainty is decreasing.

The U.S. Economic Policy Uncertainty Index is now extremely low:

True to contrarian form, this often (but not always) led to trouble in the stock market:

  1. 2000: came close to marking the bull market's top
  2. 2007: came close to marking the bull market's top
  3. 2015: just before stocks tanked

Overall, the shifting of narratives isn't a bullish sign for stocks. Last year everyone was afraid of a "recession, earnings recession, yield curve inversion, etc." Now, it seems that this sort of talk has mostly disappeared.


Baltic Dry Index

The Baltic Dry Index is one of those indices which gets no attention until its falling. When it does fall, people start to point out "SHIPPING BELLWEATHER IS SLIDING! RECESSSIONNNN!!"

But in all seriousness, here's the S&P 500 vs. the Baltic Dry Index over the past 5 months:

When the Baltic Dry Index fell more than -60% over a 4 month period while the S&P rallied, it wasn't a consistently bearish factor for the stock market.

Seasonality factors are weighing down on the Baltic Dry Index, so this isn't quite a sign that "the global economy is going off the rails". The Baltic Dry Index has a strong tendency to fall from Q4 of each year to Q1 of the next year. Hence why most of the historical cases occurred from January-March:


More divergences

Speaking of divergences, the Wall Street Journal noted that the copper:gold ratio has fallen over the past 2 weeks while emerging markets equities have held steady. Perhaps the copper:gold ratio is implying that emerging markets will soon follow suit?

When we look at historical cases in which the copper:gold ratio diverged from the MSCI Emerging Markets Index, it's clear that this wasn't consistently bullish or bearish for emerging market equities. Most divergences simply don't amount to much.


My trading portfolio

My trading portfolio is allocated 50% in the Macro Index Model and 50% in the Simple Trading Model With Fundamentals. At the moment I have instituted a discretionary override and gone 100% long bonds (instead of long stocks) due to the extreme nature of many of our core indicators, even though some of these core indicators aren't in the models.

Performance in 2020 through to January 6, 2020:

  1. My trading account is up 0.44%
  2. Currently 100% in bonds

Sorry, you don't have access to this report

Upgrade your subscription plan to get access
Go to Dasboard
DATA &
TECHnologies
IndicatorEdge
‍
BackTestEdge
‍
Other Tools
‍
DataEdge API
RESEARCH
reports
Research Solution
‍
Reports Library
‍
actionable
Strategies
Trading Strategies
‍
Smart Stock Scanner
‍
FREE
RESOUrCES
Simple Backtest
Calculator
Simple Seasonality
Calculator
The Kelly Criterion
Calculator
Sentiment Geo Map
‍
Public Research Reports
‍
Free Webinar
COMPANY
‍
About
‍
Meet our Team
‍
In the News
‍
Testimonials
‍
Client Success Stories
Pricing
Bundle pricing
‍
Announcements
‍
FAQ
© 2024 Sundial Capital Research Inc. All rights reserved.
Setsail Marketing
TermsPrivacyAffiliate Program
Risk Disclosure: Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

Testimonial Disclosure: Testimonials appearing on this website may not be representative of other clients or customers and is not a guarantee of future performance or success.