Market strength has flipped! Did you notice where the stock market strength is now?
Adrian Reid
I help analytical stock traders who are erratic, discretionary and uncertain transform into consistent, confident and rules based traders using proven systems not their emotions. DM for inquiries.
The long awaited correction in tech stocks continued last week with the Nasdaq off 2.6% for the week. At this magnitude of decline though, it is very much still a correction - certainly not a 'rout' or a 'crash', especially in the context of the Nasdaq's 22% gain over the last 52 weeks. There may very well be another strong leg up, but we will have to watch and see whether how this trend unfolds. I will be watching with interest to see how the market responds this week.
Even more interesting recently has been the resurgence of small cap strength in the US market. For the first time in 2024 the Russell 2000 Equal Weight Index, a good measure of small cap performance, has substantially out performed the mega cap focused S&P 500 and Nasdaq 100. All segments of the market get their time in the sun and it might just be the time of small cap trend following to emerge as the leader in the portfolio.
.Note of course that I certainly don't advocate shifting your portfolio towards different sectors on a discretionary basis - if anything I encourage traders to have patience with their strategies while they go through the inevitable flat spots and under performance... combined with a well diversified portfolio of strategies that covers a range of markets, strategies and timeframes.
Internationally there has been relative strength in the Canadian market, but Hong Kong has continued it's slide that started in mid May and the Australian market has followed the S&P down in the last week
In the table below you can see that it is not just the Hong Kong market that has been hit in Asia - Asian markets across the board have had big corrections with the exception of India. Japan and Taiwan leading the route with 6% and 8% declines respectively.
This shifting strength from US large caps to small caps at the same time as significant down trends in the Asian markets continues to reinforce the idea of trading long / short across multiple markets as the best way of achieving stability in your portfolio of systems
The crypto markets have had a minor rally over the last couple of weeks, but as you can see in the chart of Bitcoin below, the downtrend has not broken and price is still within the wide bearish trading range that has been in place since the end of the March rally. I am not going to get too excited about this until I see a decisive break of the downtrend in both BTC and ETH
Trading Tip: Selecting your 'In-Sample' and 'Out of Sample' test data
Ensuring that both your in-sample and out-of-sample backtest data include multiple bull and bear cycles is crucial for developing a robust trading system. Here’s a tip on how to manage this effectively:
1. Comprehensive Market Cycles in In-Sample Data : When selecting your in-sample data for backtesting, it's essential to include complete market cycles. This means your data should cover several periods of both bull markets (rising prices) and bear markets (falling prices). This approach helps you understand how your trading system performs under various economic conditions, ensuring it's not overly optimized for a single market type.
2. Diverse Conditions in Out-of-Sample Data : Reserve a portion of your data for out-of-sample testing that also includes multiple market cycles. This data set should ideally be separate from the in-sample data and not used in the system development phase. By testing your strategy on this unseen data, you can validate its effectiveness and generalizability across different market conditions, not merely its ability to repeat past performance.
By incorporating multiple market cycles in both your in-sample and out-of -of-sample data, you ensure that your trading system is tested against a realistic variety of market scenarios, which is crucial for assessing its real-world applicability and resilience. This method helps mitigate the risk of curve fitting and enhances the confidence in the system's performance across different market phases.
Member Wins
Our MEMBER OF THE WEEK is Halim M. from the Netherlands.
Halim came to EST having already had some experience with trading systems and backtesting and was looking forward to pulling all of the loose ends together and accelerating his progress with The Trader Success System. He has certainly done that - powering through the course material, asking fantastic questions and attending System Trader Launchpad Live, Acceleration Sessions, Breakthrough Workshop and System Builder's Club... plus he always has a smile on his face and is keen to contribute to the community.
领英推荐
All in all I can say we are thrilled to have you as part of our Trader Success System community Halim - Keep up the great work and engagement!
News from EST
We have almost completed our Live System Trader Launchpad program for our new Trader Success System members - the last session will be tonight. I am excited because this program has not been updated for a few years and with this complete we will have an all new, fully updated System Trader Launchpad course which I am extremely happy with!
I am putting the finishing touches on my long anticipated update of the Capital Allocation Spreadsheet for Trader Success System members... this one is awesome because it combines a number of super powerful functions into a single tool including:
I am confident that members of The Trader Success System will be thrilled with this great new tool when it is released (hopefully in the next 2 weeks).
Over the last three months, we’ve welcomed several new members to The Trader Success System who were initially hesitant. They had previously invested significant sums in various trading courses without seeing the insights, learning or returns that they hoped for. They were understandably reluctant to invest further.
However, they decided to take the plunge with us, motivated by our promise that The Trader Success System is the last stock trading course they’ll ever need. Our Ultimate Trader Success Bundle—which includes The Trader Success System, Smart Stock Automation Engine, White Glove Automation Installation, and six months of mentoring—guarantees you’ll be fully automated with a portfolio of three or more systems within six months, or we’ll work with you for free for another 6 months to make it happen. The feedback from these new members has been overwhelmingly positive. Their progress and the depth of their questions clearly show that The Trader Success System is fulfilling it's promise and "closing the gaps" and 'tying together all the loose ends" and "finally giving a complete view of everything that is needed to succeed at trading". I am super happy with how the program is going.
I was also thrilled to receive this feedback from one of our students about one of EST Coach Carson's Acceleration Sessions last week:
"It was a great session Carson. I learnt a lot. Your answers to the participants' questions were clear, concise, and spot-on. I also observed that you encouraged participation by inviting people to share their thoughts. You also guided discussions without imposing your own views (e.g. by acknowledging the different ways of doing things). I struggle to think of ways you could have done better."
If you are an analytical person with $50k USD or more to invest and you want to fully automate and take control of your trading in the next 6 months, schedule a time to speak with me and we will see if you are a good fit for the program. Click here to schedule a time to speak with me, but hurry, I can only taking the first 5 calls this week.
On the Home Front
After 3 weeks of illness in the house we are finally all healthy again, the kids are back at school, the sun is shining (today) and the dog even got taken for a walk... feels like things are on track!
I am super proud of my son who is preparing for his HSC trial exams (he finishes high school this year and is very much on the home stretch). He has been putting in some great effort doing past exam papers, finding knowledge gaps and closing them and preparing for the exams. Great job Quin!
We had a visit from our eldest daughter (who has been living out of home for quite a few years now) on the weekend and it was great to see the three kids having fun being kids together. We even managed to all go out to dinner together which was fantastic!
Have a great week.
Remember - You're only one trading system away!
Adrian Reid
Founder - Enlightened Stock Trading