Saturday , January 18 2020
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The author 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.

Humble student of the markets

Is the market melting up?

Mid-week market update: I am leaving on a seasonal family vacation tomorrow, so posting will be lighter than usual. While the usual weekend publications will continue, tactical market interpretations are problematical this time of year when liquidity is low. However, here are some guidelines on how to think about the stock market for the remainder of 2019. Recently, there have been more voices calling for a market melt-up. Bloomberg reported that BAML strategist Michael Hartnett called for...

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Factor investing: Theory vs. practice

As regular readers know, I have been an advocate of taking an overweight in cyclical exposure in equity portfolios (for the latest update, see Adventures in banking). While I continue to believe that the approach is sound, the reality has been less than fully satisfactory in the US. Among the cyclical groups, the semiconductors are on fire, and homebuilding stocks are weakening but remain in a relative uptrend. However, both industrial and transportation stocks have failed to hold their...

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Adventures in banking

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 Asset Allocation Model is an asset allocation model which applies trend following principles based on the inputs of global stock and...

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Here comes the beta chase

Mid-week market update: Notwithstanding any issues traders may have with short-term volatility, the market is setting up for a year-end beta chase Santa Claus rally. After a prolong period of defensive posturing, equity fund flows are turning strongly positive again.  As the TD-Ameritrade IMX shows, retail positioning is still underweight, and the scope for more buying into year-end and 2020 is still significant.  Macro Charts also pointed out that hedge funds are now in a FOMO...

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The market is oversold? Already?

I was not at my desk and out at some meetings on Monday. When I returned near the end of the day, I nearly fell off my chair when I saw the VIX Index had spiked above its upper Bollinger Band again, indicating an oversold market.  Is the market oversold? Again? So soon?  Looking for confirmation Short-term momentum does not appear to be oversold. In fact, they show a market that was overbought and recycling downwards, which is a short-term sell signal.  What’s going on? The...

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How far can Tariff Man dent the stock market?

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 Asset Allocation Model is an asset allocation model which applies trend following principles based on the inputs of global stock and...

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Assessing the technical damage

Mid-week market update: The stock market weakened on Monday when Trump’s early morning tweet indicated that he was slapping on steel and aluminum tariffs on Argentina and Brazil. The sell-off continued into Tuesday when Trump said in a news conference that he was in no hurry to do a trade deal with China, and he was willing to wait until after the 2020 election.  The market was already vulnerable to a tumble two weeks ago when it violated a rising trend line. This was followed by a...

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The Achilles Heel of my bull case

In response to my last post (see Buy signal confirmed: It’s a global bull), I received an email yesterday from a long-time reader who observed that I was channeling the perennially bullish Chris Ciovacco. While my post yesterday highlighted the monthly MACD buy signal on global stocks, Ciovacco’s latest weekly video referenced the monthly MACD buy signal on the DJIA. That said, no one could accuse me of being a permabull or permabear. My track record of major market speaks for itself. Most...

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Buy signal confirmed: It’s a global bull

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 Asset Allocation Model is an asset allocation model which applies trend following principles based on the inputs of global stock and...

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Short-term risks are rising

Mid-week market update: Even though I remain constructive on the intermediate term market outlook, short-term risks are rising. The VIX Index fell below its lower Bollinger Band on Monday, which is an indication of an overbought market. In addition, the index is flashing a negative divergence on its 5-day RSI.  Historical study Here is the historical study of what happens when the VIX falls below its lower BB. Returns are subpar and bottom out about four days after the signal. If you...

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