The Schrödinger Market: Is This Cat Dead Or Alive?
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Market On Open, Tuesday 31 March
by Alex King, CEO, Cestrian Capital Research, Inc.
Right on cue, here comes a bounce in equities in pre-market trading. At the time of writing, S&P500 futures are up around 0.8% on prior close, the Vix is down about 5%, whilst oil continues to trend up, WTI futures being currently about +1.4% up on prior close.
Sustainable recovery or dead cat bounce? I have no clue. I do expect to see stimulus of many kinds applied to the market and the economy, and I think that is showing up in the declining bond yields - yesterday bond yields dropped markedly and were doing so whether equities were moving up or down. I am not sure why, in the midst of an inflationary impulse, commercial buyers would naturally make a dash for bonds, so my guess is that governmental liquidity was behind the move. Time will tell.
For now I think markets remain somewhat on tenterhooks. A time to protect capital rather than to be a hero. If a flip to the upside comes, there will be time enough to dial up allocations and ride the wave back up.
The Wall Of Worry vs. The Slope Of Hope
After stocks have fallen is a very tricky time for investors. Rapid reversals to the upside come along often and can generate wonderful gains even if they are simple countertrend rallies in overall bearish conditions. Not taking gains on such reversals only to see the gains evaporate on a further slide in stocks can be heartbreaking. Volatility of the kind we are all experiencing at present is emotionally, psychologically and potentially financially draining. I don’t care who you are, how long you have been doing this, or how good a position you are currently in, this kind of environment are difficult to manage.
Machine learning algorithms don’t get stressed, however. Our SignalFlow family of algos continue to perform very well whatever the weather. One that has now come into its own is the SignalFlow Long/Short Algo service.
Results as follows, all simple ETFs, no options, no leverage, no futures, nothing facncy:
- Live Trading Since 1 January 2025: +18% vs. SPY +10%
- Sharpe Ratio: 1.85 vs. 0.50 for SPY
- Sortino Ratio: 2.5 vs. 0.6 for SPY
The service could not be easier to use. At the close each day you receive a trade signal for your consideration. The signal tells you what the model thinks is the best positioning into the next trading day.
The model has three choices: long SPY, short SPY (you can use long SH instead if you prefer), or cash. It can take a full or a half position. For all of March the model has chosen to be half cash and half short SPY (again, you could use half cash and half long SH if you prefer). I am confident that the model will flip long if and when the market firms up.
You can learn more about SignalFlow AI Long/Short here.
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So What About That Cat?
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