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Tuesday, Jun 27th

Last UpdateTue, 27 Jun 2017 8am

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US Stocks - S&P 500


Our current trading signal for the S&P 500 index (ETFs: SPY, IVV, and VOO) is BUY. We use a quantitative approach to develop investing views for the US stock market. Our model contains more than a hundred components covering key areas such as Fed monetary policies and FOMC open market operations, inflation rates and expectations, private and public debt levels, fiscal deficits, normal and real interest rates, consumer and business confidence, employment and payroll levels, orders, sales, inventories, manufacturing surveys, housing market sales and prices, home building and construction activities, private and public spending, personal income, corporate earnings and balance sheets, credit growth, lending conditions, trade and current account balances, national savings, price actions, margin debts, fund and ETF flows, futures speculation levels, implied and realized volatility, volatility skews, put/call ratios, short interests, cash balances, sovereign and credit spreads, term structure and butterflies, and inter-bank liquidity. The analysis studies the relationship between equity prices and the multi-dimensional matrix of these variables to predict price actions and market trends within a cycle framework. Investor sentiment and expectations are also important factors in the algorithm for determining the outlook of the US stock market.

Based on a scale from 0 to 100, with 100 being the most bullish and 0 being the most bearish, our latest model reading for the S&P 500 index is 59.54. The average return of the trades is 68.00% and the annualized return of the trades is 14.69%. Measuring the risk-adjusted performance, the model has produced a Sharpe Ratio of 1.00, which is driven by the model's standard deviation of 14.75%. For comparison purpose, the Sharpe Ratio of the buy and hold strategy for the S&P 500 index is 0.42. The Sortino Ratio, which measures the relative returns of the model over its downside deviation of 8.83%, is at 1.43. The Calmar Ratio, which is the ratio of the average return over the maximum drawdown, is at 0.82. The calculation of the model for the S&P 500 index took 9.34 hours per CPU core to complete at our central computation workstations, which are a group of powerful computers that perform statistical computation continuously 24 hours day and 7 days a week to produce real-time trading signals for the S&P 500 index.

Our model output shows that there will be excellent returns on investments in the S&P 500 index. Accordingly, we think that this is the phase when a portion of the portfolio can be allocated to the S&P 500 index. The table below shows selected drivers that have significant recent updates. They are among the large macro database on which we perform statistical analysis to project future price trends and develop investment views. We do not rely only on any single factor to model our investments. Instead, the cross relationships of all the factors and time series are researched back over many market cycles in both periods of secular bullish and bearish trends. The goal of our algorithm is to identify profitable buy and sell opportunities and optimize the risk/return profile for the S&P 500 index.

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