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Cam Hui

Cam Hui

Cam Hui has been professionally involved in the financial markets since 1985 in a variety of roles, both as an equity portfolio manager and as a sell-side analyst. He graduated with a degree in Computer Science from the University of British Columbia in 1980 and obtained his CFA Charter in 1989. He is left & right brained modeler of quantitative investment systems. Blogs at Humble Student of the Markets.

Articles by Cam Hui

The universe is unfolding as it should

17 days ago

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 […]To access this content, you must be a subscriber.

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The inevitability of rising trade tensions under a GOP president

20 days ago

There has been a lot of hand wringing about the rising level of protectionism in the US and around the world. Let’s take an alternative view to perform our analysis. Imagine an alternative universe, where Donald Trump did not secure the GOP nomination in 2016, but another Republican went on to win the election. I am going to make the bold assertion that trade tensions would have risen in any case. 

There are two reasons for my conclusion. First, globalization has stalled, and the low hanging fruit from globalization and globalized supply chains has mostly been harvested. In addition, a Republican President would have enacted a tax cut, and the resulting fiscal stimulus would have created a positive growth differential with the rest of the world and pushed up the USD. The

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Charted: How worried should you be about a trade war?

23 days ago

Understandably, there has been a lot of market angst over a looming trade war. Indeed, the University of Michigan Business Confidence Index shows a rising level of anxiety. 

How worried should you be? 

Measuring the Trump effect
I approach the question in a number of ways. First, let’s measure the Trump effect on the economy. An article over at VOX used a technique called “synthetic control method” that is frequently used to estimate the effects one-time shocks, such as German re-unification or Brexit. They found that Trump had little or no net effect on economic growth or employment:

Our approach is to let the data speak for itself. We let an algorithm determine which combination of other economies matches the evolution of real GDP in the US beforethe 2016 election with the

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How the equity bulls and bears may both be right

24 days ago

Preface: Explaining our market timing modelsWe 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 the trading component of the Trend Model to look for changes in the

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Upside breakout, FOMO rally next?

28 days ago

Mid-week market update: It’s finally happened. The SPX staged a convincing upside breakout from its cup and handle formation. Depending on how you draw the lower line, the upside target is in the 2925-2960 range. The first test will be resistance of the January highs. 

Upside breakouts are bullish. What more do you need to know? 

Bullish confirmation
The upside breakout has been confirmed by the bullish market action in other US and non-US indices. The NASDAQ Composite has already made an all-time high. 

The broadly based Wilshire 5000 has made a similar upside breakout of a cup and handle formation. 

I wrote earlier in the week that China related plays were wash-out and poised for relief rallies (see Tariffs to the left, tariffs to the right…Contrarians buy China!).

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Tariffs to the left, tariffs to the right…Contrarians buy China!

July 16, 2018

The news about the Sino-American trade war seems to get worse every day. Callum Thomas pointed out that corporate managements are increasingly raising concerns about rising tariffs. 

Chinese stocks have cratered, along with the stock indices of China’s largest Asian trading partners. However, a couple of contrarian buy signals are appearing. First, trade tensions are now showing up in the one place that you might expect, FX volatility. 

As well, Chinese and other Asian markets are washed-out and poised for relief rallies, which would also be supportive of higher global equity prices. 

Poised for an oversold rally
From a technical perspective, Chinese and Asian markets are showing signs of a turnaround. The Shanghai Index recently flashed a buy signal when the stochastic

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The surprising conclusion from sector leadership analysis

July 15, 2018

Preface: Explaining our market timing modelsWe 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 the trading component of the Trend Model to look for changes in the

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Don’t mistake this site for a chat room

July 12, 2018

I had a number of questions and comments from my last post (see Wall Street: Where the Wild Things are) when I wrote that my trading account, while still bullish, had taken “partial profits earlier this week as part of his risk control discipline when readings became short-term overbought”. The comments ranged from “where can I find a record of where your decisions to take partial profits” (answer: you can’t) to “why did you not tell us when you made that trade?”/ 
>Humble Student of the Markets state:

This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy.
What does this mean, beyond the usual legalese? Why is the content “not

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Wall Street: Where the Wild Things are

July 11, 2018

Mid-week market update: There is a children’s book called Where The Wild Things Are by Maurice Sendak that stands as a metaphor for the stock market’s action. Here is a summary from Wikipedia:

This story of only 338 words focuses on a young boy named Max who, after dressing in his wolf costume, wreaks such havoc through his household that he is sent to bed without his supper. Max’s bedroom undergoes a mysterious transformation into a jungle environment, and he winds up sailing to an island inhabited by malicious beasts known as the “Wild Things.” After successfully intimidating the creatures, Max is hailed as the king of the Wild Things and enjoys a playful romp with his subjects. However, he starts to feel lonely and decides to return home, to the Wild Things’ dismay. Upon returning

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Trade War Apocalypse, or Sell the rumor, Buy the news?

July 8, 2018

Preface: Explaining our market timing modelsWe 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 the trading component of the Trend Model to look for changes in the

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An oversold bounce, but how far?

July 4, 2018

Mid-week market update: I would first like to convey to all of my American friends my best wishes for a Happy 4th of July. Enjoy you day off, as more fireworks may be on the way.
The stock market appears to be starting an oversold bounce. Callum Thomas has been conducting an weekly (unscientific) Twitter poll since July 2016. Sentiment seems to be sufficiently washed out for an oversold rally. 

Similarly, breadth readings from Index Indicators also show that the market is ready for a bounce. 

The big question is, “How far can stock prices rise?” 

A bearish milestone?
The bulls face an intermediate term problem of weakening momentum. Marketwatch highlighted the fact that both the DJIA and SPX are approaching a bearish milestone. As of last Friday, these two stock indices had

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What you may not know about the Smart Money Index

July 2, 2018

This is one in an occasional series of articles highlighting hidden investing factors. For the previous article in the series, please see What you may not know about small cap stocks.
There has been some buzz in social media about the following chart that correlates the Fed’s balance sheet with the Smart Money Index (SMI). Readers can draw their own conclusions, but the initial take has bearish implications.

What’s behind the SMI, and is it bearish for stock prices?

Unpacking the Smart Money Index
I am indebted to Jesse Felder, who analyzed the SMI and explained how it is calculated:
Much has been made of the plunge in the Smart Money Index this year and for good reason. In the past, major downturns in the index like we are witnessing today have proved to be prelude to major

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A looming global recession, or buying opportunity?

July 1, 2018

Preface: Explaining our market timing modelsWe 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 the trading component of the Trend Model to look for changes in the

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A trader’s guide to spotting market bottoms

June 28, 2018

Now that the SPX flirted with the combination of the 2700 level and its lower Bollinger Band (BB), it’s time to see if the market is ready to bottom on a short-term and intermediate basis. 

Let`s analyze outlook from the perspective of breadth, momentum, and sentiment. 

Breadth and momentum
The readings from breadth and momentum indicators are mixed. The breadth reading from Index Indicators certainly indicates that the market is oversold, and it would be no surprise for stock prices to bottom and rally from these levels. But is it sufficiently oversold for a durable bottom? 

I wrote in my last post (see 4 reasons why the bull is still alive) that I was waiting for a re-test of the lows that was accompanied by a positive RSI divergence. We got the re-test yesterday

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The 4 reasons why the bull is still alive

June 26, 2018

Mid-week market update: In light of the recent market turmoil, I thought I would publish my mid-week market update early. The Shanghai Index moved into bear market territory by declining 20% on a peak-to-trough basis overnight. The SPX is testing its 50 day moving average (dma). Europe is struggling as both the FTSE 100 and Euro STOXX 50 have violated near-term support levels.
Is this a warning that the bull is dying?
I have some good news and bad news. The good news is the bull market is still alive. The SPX is undergoing a correction, but it remains in an uptrend within a range-bound consolidation that began in February. 

The bad news is traders need to expect more short-term pain. 

Market internals still bullish
In addition to the above chart showing the SPX in an uptrend, a

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How Trump’s midterm strategy heightens market risk

June 25, 2018

A recent Axios story featured an interesting political perspective on Trump’s possible strategy for the midterm elections:

An odd paradox in defining this moment in politics: The more President Trump does, says and tweets outrageous things, the more his critics go bananas and the better he does in the polls.
Indeed, Gallup’s tracking poll of presidential approval has been steadily rising for much of this year. CNBC also reported that a majority of Americans approve of Trump’s handling of the economy for the first time. 

Axios went on to state that this strategy is risky because it is entirely dependent on energizing his support base:

The rise in Trump’s numbers, and the shrinking Democratic advantage in House races, are reinforcing Trump’s worship of his own instincts on policy.

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How close are we to a recession?

June 24, 2018

Preface: Explaining our market timing modelsWe 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 the trading component of the Trend Model to look for changes in the

Read More »

What you may not know about small cap stocks

June 21, 2018

This is one in an occasional series of articles highlighting the hidden investing factor exposures, starting with small cap stocks. Small caps have been on an absolute tear lately, both on an absolute basis and relative to large caps. 

Does that mean you should jump on the small cap momentum train?
Momentum is evident even from a fundamental viewpoint. Analysis from Yardeni Research reveals that small cap earnings estimates have been rising faster than large caps, even after the tax cut earnings surge. If you squint, you will see that the slope of small cap EPS revisions is steeper than large cap revisions. 

Hidden USD factor exposure
However, small cap outperformance can be partly explained by their USD exposure. The correlation between the size factor and the USD is evident

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Is the trade war correction over?

June 20, 2018

Mid-week market update: The fate of this market is becoming highly news dependent. Ed Yardeni recently stated in on CNBC that he has never seen a “president this bullish and bearish at the same time”. The market wants to go up on earnings, but it has been held back by Trump`s protectionism.
Will stock prices rise or fall? Is the trade war correction over?
Unfortunately, my time machine is in the shop getting fixed. However, we can rely on technical and sentiment analysis to give us some clues. First and most encouraging was the market price action overnight. The Shanghai market stabilized and showed a minor gain after the horrendous drop Tuesday. The stock markets of China’s major Asian trading partners also showed signs of recovery, and the markets in Hong Kong, South Korea, and

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What Trump won’t tell you about the price of a trade war win

June 17, 2018

Preface: Explaining our market timing modelsWe 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 the trading component of the Trend Model to look for changes in the

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Things you don’t see at market bottoms: Giddiness revival edition

June 14, 2018

The last time I published a post in a series of “things you don’t see at market bottoms” based on US based investor enthusiasm was in January. That’s because market exuberance had significantly moderated since the January top. Guess, what, the giddiness is baack!
As a reminder, it is said that while bottoms are events, but tops are processes. Translated, markets bottom out when panic sets in, and therefore they can be more easily identifiable. By contrast, market tops form when a series of conditions come together, but not necessarily all at the same time. My experience has shown that overly bullish sentiment should be viewed as a condition indicator, and not a market timing tool.
Past editions of this series include:
I reiterate my belief that this is not the top of the market, but

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How far can this rally run?

June 13, 2018

Mid-week market update: Since early May, it has been evident that the bulls have regained control of the tape (see The bulls are back in town). Not much can faze this market. Even today’s hawkish Fed rate hike left the market down only -0.4% on the day. The question for investors then becomes how far this rally can go.
From a technical perspective, the answer was surprising. Applying point and figure chart on the SPX yielded a target of 2609 using the parameters of daily prices, and the traditional box size and 3 box reversal. Extending the time horizon to weekly prices, the target was 2549, and monthly prices, 2579. 

This analysis implies that the market has overshot its target. But varying the parameters using a % box size told a different, and more bullish, story.
A point and

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Can America still lead the world?

June 10, 2018

Preface: Explaining our market timing modelsWe 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 the trading component of the Trend Model to look for changes in the

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What June swoon?

June 6, 2018

Mid-week market update: Sell in May? June swoon? Not so far! As the SPX convincingly staged an upside breakout above the 2740 resistance level, the bull case is easy to make. We have seen fresh all-time highs this week from the following:
NASDAQ Composite
Russell 2000 small caps
NYSE Advance-Decline Line
NASDAQ Advance-Decline Line
I probably forgot a few, but you get the idea. In addition, the metrics of risk appetite, such as the ratio of high beta to low volatility stocks, is exhibiting a positive divergence. 

Hold the celebrations! While I have been bullish throughout this corrective episode, I am very aware that the bulls still have some short-term challenges to overcome. 

A bulls’ party
It`s hard not to be bullish. risk appetite indicators such as the relative performance of

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2 contrarian trades that will make you uncomfortable

June 4, 2018

Do you really want to be a contrarian investor? Most of the time, being contrarian means that your investment views are far from the crowd, and you will feel very isolated and uncomfortable. With that preface in mind, I offer two uncomfortable contrarian trades, based purely on technical analysis.   Fading a NAFTA breakdown Let’s […]To access this content, you must be a subscriber.

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Revealed: The market timers’ dirty little secret

June 3, 2018

Preface: Explaining our market timing modelsWe 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 the trading component of the Trend Model to look for changes in the

Read More »

The hidden MACD message from the markets

May 30, 2018

Mid-week market update: Callum Thomas conducts a regular weekly (unscientific) Twitter poll of equity market sentiment, and the latest results show that both fundamental and technical bullishness are falling. These readings suggest that bullish momentum is waning.

Indeed, daily MACD has been decelerating and turned negative this week, indicating that the bears are taking control of the tape. However, I would point out that many past episodes of negative MACD in the last year has seen little market downside, so an aggressive bearish trading stance may not be warranted.

That`s not the whole story.

Fun with MACD
The weekly chart has a different message. MACD is rising, indicating that any market weakness is likely to be temporary and should be bought.

The narrative of

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Offbeat Thursday and Friday forecasts

May 29, 2018

Brett Steenberger recently warned that traders about trading on noise, which is advice to which I wholeheartedly agree:

In other words, before we can determine whether or not we have an edge (in systematic or discretionary trading), we need to establish knowledge. A theory explains how and why something occurs. Testing of historical data can help us conduct limited, targeted tests to determine whether our theory holds up in practice. Before we test, we must formulate a plausible hypothesis. There is no theoretical or practical rationale why many strategies in technical analysis, fundamental analysis, or random combinations of quantitative variables should be valid.

With that caveat, I offer two offbeat forecasts for the markets for this coming Thursday and Friday. 

A QT

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Could a weak consumer stall the economy?

May 26, 2018

Preface: Explaining our market timing modelsWe 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 the trading component of the Trend Model to look for changes in the

Read More »

Cue the fiscal and inflation fears

May 24, 2018

Was the recent big tax cut not enough? CNBC reported that President Trump is proposing further tax cuts before November. He went on to pressure Congress to enact funding for his budget priorities on Twitter. 

These actions prompted Steve Collender (aka @thebudgetguy) to declare in a Forbes article that Trump May Be The Most Fiscally Reckless President in American History:

But think about why Trump is asking for rapid action on the 2019 appropriations: He wants even more spending. Even though his policies have spiked the annual budget deficit to a new normal of a $1 trillion (with $2 trillion definitely within view) and interest rates are now starting to go up in large part because of his out-of-sync-with-the-economy stimulative fiscal policy, Trump is demanding that federal

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