Category: Asymmetric Risk Reward
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By and large, the stock market is correlated with consumer sentiment
I’ve shared some observations about investor sentiment this past week as sentient indicators and surveys have reached an extreme level of optimism. When sentiment reaches an extreme, we should prepare for it to swing the… Read More
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Periods of low volatility are often followed by volatility expansions
I like uptrends, until the end when they bend. This uptrend in U.S. stocks hasn’t seemed ready to bend, but we are observing signs a reversal down could be soon. I’m not necessarily talking about… Read More
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Can an optimistic investor sentiment measured by the AAII Investor Sentiment Survey trend higher?
Someone asked: Can an optimistic investor sentiment in AAII Investor Sentiment Survey trend higher? Another commented: The AAII Investor Sentiment Survey is just over its long term average, so it has room to run. Of… Read More
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Investor optimism is reaching extremes
Ok, so this isn’t anything new. I just discussed it last week in “Investor sentiment signals greed is driving stocks as the U.S. stock market reaches short term risk of a pullback.” The sentiment indicators keep… Read More
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Active management and tactical allocation isn’t the only method with “strategy risk” as global asset allocation can get off track, too
Most investors, individual and institutional, apply some kind of asset allocation method to a portfolio mix of cash, bonds, and stocks. The most diversified also invest internationally, so their portfolio is global. The most common… Read More
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The stock market has made little progress in the past two years which is a hostile condition for trend following
Until the recent breakout to new highs, the stock and bond markets have made little progress in the past two years. Below are the price trend and total return chart of the S&P 500 stock… Read More
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Why we row, not sail
When a market is rising, we can let out the sail and enjoy the ride, but when the wind stops, we row, not sail. I started using this analogy in 2005 after reading my friend… Read More
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Investor sentiment signals greed is driving stocks as the U.S. stock market reaches short term risk of a pullback
The Fear & Greed Index reaches the Extreme Greed level as I got a short term countertrend sell or hedge signal for U.S. stocks. Investors are driven by two emotions: fear and greed. Too much… Read More
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Global Macro Observations of Stock and Bond Market Trends and Volatility
The U.S. stock market indices are finally reaching new highs, but momentum indicators show them getting overbought at the same time. Nevertheless, the trend is up and volatility is declining as the trend of the… Read More
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The flaw of average in stock market returns
We apply a lot of probability and statistical analysis for investment management and also our wealth management and strategy. However, I do it with a complete system and framework that includes a heavy dose of… Read More