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 Model is an asset allocation model which 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. In essence, it seeks to answer the question, "Is the trend in the global economy expansion (bullish) or contraction (bearish)?"
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 those email alerts are 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: Sell equities*
Trend Model signal: Bearish*
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 the those email alerts is shown here.
A look ahead to H1 2019 It gives me little pleasure to say "I told you so". But I told you so.
I warned in early December that earnings were going to disappoint in 2019 (see 2019 preview: Winter is coming). Since then, tumbling earnings estimates have been one of the main reasons for the weakness in stock prices.
The recent warning from Apple is just setting the table for further disappointment, and the upcoming Q4 earnings season will be revealing as to how far estimates have to fall. I expect more market sloppiness in Q1 and the first six months of 2019, until the uncertainties surrounding the upcoming growth deceleration and trade war are resolved.
A Special Announcement We told you so. We told you the market was going down.
Here is the track of Humble Student of the Markets, where we are neither perma-bulls nor perma-bears. Most recently, we have been correctly bullish since the correction of 2015, and turned cautious in August 2018 (see Market top ahead? My inner investor turns cautious, August 5, 2018).
We were also timely at the 2009 bottom. We issued a call to buy beaten up low-priced stocks with high insider buying a week before the ultimate bottom (see Phoenix rising? February 24, 2009).
The out-of-sample record of our model trading portfolio in 2018 was up 42.9%. For more details, see our weekly updates here.
The recent market volatility has brought a flood of new subscribers, and we are announcing a price increase, and a number of other changes in order to better control the growth of our community. However, all subscribers will be grandfathered at their old prices.
The following changes will occur as of March 1, 2019:
The annual subscription price will rise from US$249.99 to US$356 per year.
The monthly subscription price will rise from US$24.99 to US$35.60 per month.
The 24-hour subscription will no longer be offered.
The embargo period for free content will change from two weeks to four weeks.
Remember, if you subscribe now, you will be grandfathered at the old price - permanently.