Quad 3, but still constructive. Risk management first, so I am hedging here...

The question is, is this a constructive pullback or is it bad?

Strategically:

1. Liquidity is up (good!)

2. Inflation is down (good!)

3. Positioning is a mixed bag!

Network Momentum / Quads are not looking too hot:

The call for next week is a Micro Quad 3, but a Quad 3 with a * —> I still think this is a constructive pullback, but next week is key.

Why?

The composition of network momentum looks still o.k. —>

• Oil is not bullish trend (good!) —> Liquidity drainer, not draining liquidity now!

• Dollar is not bullish trend (good!) —> Liquidity drainer, not draining liquidity now!

• RSP (equal weighted SPY 0.00%↑ ) is bullish trend

• Also, I see a lot of breakouts working within the SP500 (Biotech MRNA for example)

• Bitcoin is bullish trend

• Furthermore, I have a ton of small cap value momentum strategies that are super strong right now, here my book:

Growth heavy small cap systems printed an all-time high:

The following industry groups are bullish trend:

So, Biotech (long duration), Shipping (cycs), Capital Markets and Banks (both regional and global —> early cycle) are bullish trend into a 4% drawdown of the QQQs?

This Quad composition is not too bearish.

Tech is pulling back right now, but after that 2023 run this is well deserved:

Breadth though gives a sell signal:

Risk Management first, so I am hedging my portfolio with a 20% short on IWM and 20% short on QQQ with leverage (90% long, 40% short).

My best guess: constructive pullback so far, but after a > 30% run of my portfolio in Q4 2023 I lean to protection.

https://www.msci.com/www/blog-posts/markets-in-focus-concentrating/04295073149

What else do I think?

Profitable small caps will do well (see above MSCI Factor Model + how my strategies behave). Also, I think the Biotech rally will have legs (breakouts really follow through right now).

All the best and best regards.

Andreas

The information on from Andreas Himmelreich / QuantStrike and this video / blog is for information and discussion purposes only. It does not constitute a recommendation to purchase or sell any financial instruments or other products. Investment decisions should not be made with this video / blog, and one should consider the investment objectives or financial situation of any person or institution.

Investors should obtain advice based on their own individual circumstances from their own tax, financial, legal and other advisers about the risks and merits of any transaction before making an investment decision, and only make such decisions based on the investor’s own objectives, experience, and resources.

The information from Andreas Himmelreich / QuantStrike and this video / blog is based on generally available and paid information and, although obtained from sources believed to be reliable, its accuracy and completeness cannot be assured, and such information may be incomplete or condensed. All performance results are hypothetical and the result of back testing only. Out-of-sample performance may be different. No claim is made about future performance.

Investments in financial instruments or other products carry significant risk, including the possible total loss of the principal amount invested. Andreas Himmelreich / QuantStrike and this video / blog do not purport to identify all the risks or material considerations which may be associated with entering any transaction. Andreas Himmelreich / QuantStrike and this video / blog accepts no liability for any loss (whether direct, indirect or consequential) that may arise from any use of the information contained in or derived from Andreas Himmelreich / QuantStrike and this video / blog.