Quad 1, not a big pitch though...
We are still clearly in micro quad 1:
Again, a very shallow pullback, we are still consolidating, nothing major!
We are now 14 weeks in a qua1 - 2 environment, this is a pretty stable market.
But this is not a big pitch environment, for this the pullbacks are too shallow.
Big pitch long would be (this is a perfect example, not all signals are clear as this!):
1.    Quad is improving (in this case from 3 to 1 at 6th of January)
2.    Quad 1 - 2 systems and Quad 1 and 2 Exposures (Higher Beta Industry Groups) are close to new local highs while SPY is still coming out of a drawdown + they (Quad 1 - 2 systems and Quad 1 and 2 Exposures) have put in a volatility contraction pattern and break out before the quad change (then we chase!).
So, while nothing points to a huge problem here (until quads change), this is not the point in time to chase! Keep your longs and watch them :-)
My system book raised cash three weeks ago, but also nothing major.
So, I basically have to wait until the situation changes.
Until then, not much to do, besides me who hedged about here with a 0% expusure since then and now has to find a spot to lift them ;-)
As I stated before, the micro quads are not perfect, but I think the edge over macro services that use lagging economic data is substantial (sorry to be blunt!).
AND: I think I have an edge compared to macro services that give all price based factors (good and bad trending) the same weight to determine the market regime (which I do not do, I only use the best trending factor loadings!).
Yes, there is one advantage and one disadvantage of the micro quads: They can change fast. But they also capture stable trends.
So, expect active trading. Do not ask me where the market will be in 3-6 Months. I do not know, and I think that very few know with an accuracy that can be traded.
We are in the nearcasting bussiness, not in the forcasting business.
And the best traders have an economic macro view, but even for them price action trumps everything:
https://twitter.com/MacroOps/status/1276205912013840384
The best hedge funds I know nearcast, they do not trade a longer time view and they have small enough assets under management to adapt fast to the regime. There is a reason why the best hedge funds are closed for new capital: if they would raise more capital, they could not capture shorter term swings, because they would have too much capital to be in and out fast.
All right. Have a great week!
All the best and best regards.
Andreas
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