Three questions to ask as fear spikes

Preface: Explaining our market timing models We maintain several market timing models, each with differing time horizons. The "Ultimate Market Timing Model" is a long-term market timing model based on the research outlined in our post, Building the ultimate market timing model. This model tends to generate only a handful of signals each decade.
The Trend Asset Allocation Model is an asset allocation model that applies trend following principles based on the inputs of global stock and commodity price. This model has a shorter time horizon and tends to turn over about 4-6 times a year. The performance and full details of a model portfolio based on the out-of-sample signals of the Trend Model can bsoe found here.


My inner trader uses a trading model, which is a blend of price momentum (is the Trend Model becoming more bullish, or bearish?) and overbought/oversold extremes (don't buy if the trend is overbought, and vice versa). Subscribers receive real-time alerts of model changes, and a hypothetical trading record of the email alerts is updated weekly here. The hypothetical trading record of the trading model of the real-time alerts that began in March 2016 is shown below.

The latest signals of each model are as follows:

• Ultimate market timing model: Buy equities*
• Trend Model signal: Neutral*
• Trading model: Bullish*

* The performance chart and model readings have been delayed by a week out of respect to our paying subscribers.

Update schedule: I generally update model readings on my site on weekends and tweet mid-week observations at @humblestudent. Subscribers receive real-time alerts of trading model changes, and a hypothetical trading record of those email alerts is shown here.

Subscribers can access the latest signal in real-time here.



Another 200 dma testIn the wake of the drama that played out in the stock market last week, the S&P 500 weakened to test the 200 dma. Is this just a re-test of the January lows or the start of a new bear leg?


To answer that question, I step outside the realm of pure technical analysis and pose three questions for both bulls and bears.

1. What will happen to earnings and earnings expectations in the wake of the hot January CPI report that spooked the market?
2. Fed Funds futures are now discounting a half-point liftoff at the March FOMC meeting. Some analysts have even speculated that the Fed may raise by a quarter-point in a surprise inter-meeting move. Will the Fed acquiesce or push back against those expectations?
3. If stock prices were to weaken further, how will insiders react?

The full post can be found here.