While we provide quantitative market analysis, we trade solely using our quantitative trading models. Trading models are end-to-end systems that provide you with an edge in the markets.
Here is a list of our quantitative trading models.
- Medium-Long Term Model
- Macro Investing Model
- Short Term Trading Model
- Simple Trading Model
- Bull Bear Simple Trading Model
- Multi-asset Simple Trading Model
- Multi-asset Simple Trading Model With Fundamentals
- Dual Momentum Model With Fundamentals
- Conference Board LEI Model
- Alternating between stocks and gold model
- Trading individual sectors model
- REIT Trading Model
- XLI Trading Model
Our trading models combine fundamental data with technical data.
We backtest most of our models with 50+ years of data in order to accurately understand how well these models works under all market environments (bull markets, bear markets, trending markets, choppy markets).
Because models built on less than 40 years of data tend to be flimsy.
Here’s a brief explanation for our favorite trading models
Medium-Long Term Model
The Medium-Long Term Model predicts bull markets, bear markets, and “big corrections” in bull markets. Click here for the model’s historical BUY and SELL signals.
The Medium-Long Term Model yields an average of:
- 14.7% per year when traded with $SPY (no leverage)
- 30% per year when traded with $SSO (the S&P’s 2x leveraged ETF)
BUY and SELL signals
These charts demonstrate the model’s BUY and SELL dates.
*We do not update these charts on a regular basis. We only provide the real-time BUY and SELL signals in the Bull Markets Membership Program.
Here are some more zoomed-in charts.
The Medium-Long Term Model is actually 2 models combined into 1:
- The Long Term Model predicts when bull markets will start (i.e. when bear markets will end) and when bull markets will end (i.e. when bear markets will start).
- We define “bear markets” as 40%+ declines that last at least 1 year from top to bottom. We define “bull markets” as the time between 2 bear markets.
- The Medium Term Model predicts when “big corrections” will start and end.
- A set of criteria define the term “big correction”, but generally it is a 15%+ decline.
Here’s an example (log scale chart).
Following the model to the letter will maximize long term investment performance.
Go 100% long when the model states that there is no bear market or “big correction” on the horizon.
Shift to 100% cash when the model predicts that a “big correction” or bear market will start.
Go back to 100% long when the model says that the “big correction” or bear market is over and that the stock market has bottomed.
The Medium-Long Term Model predicted each of the 4 massive bear markets from 1950 – present (1968-1970, 1973-1974, 2000-2002, and 2007-2009). In addition, it predicted the 1987 crash with stunning accuracy.
What the Medium-Long Term Model doesn’t do
The Medium-Long term model does not predict “small corrections” (e.g. 6-14% declines in the S&P 500).
Concept behind the Medium-Long Term Model
The U.S. stock market is one of the easiest markets to trade.
- Fundamentals (the U.S. economy) determine the U.S. stock market’s long term direction (i.e. is this a bull market or a bear market). The U.S. stock market and U.S. economy move in the same direction in the long term. Hence, leading economic indicators are also leading stock market indicators.
- The stock market’s medium term direction (big corrections & big rallies) is determined by a mixture of fundamentals and technicals.
*Technical analysis does not determine the long term. Technical analysis has far too many false signals. For example, every bear market includes a “breakdown below the 200 day moving average”, but most “breakdowns below the 200 day moving average” don’t lead to bear markets.
The stock market tends to go up more often than it goes down because the U.S. economy expands more often than it contracts. Recessions are short in comparison to economic expansions.
This also means that when the stock market deviates from the economy’s direction (e.g. the economy improves but the stock market goes down), the stock market will eventually re-align itself with the economy’s direction.
Valuations are of secondary importance
The Medium-Long Term Model incorporates valuation indicators. However, the Medium-Long Term Model does not rely on these indicators too much. Valuation indicators are of secondary importance.
Too many traders rely heavily on valuations to trade. In reality, valuation indicators are long term indicators. They aren’t short term or medium term indicators.
- Valuations tell you where the market will be in 5-10 years.
- Valuations don’t tell you where the market will be in the interim. I.e. valuations don’t tell you where the stock market will be next week, next month, or even next year.
Here’s the data to prove that valuations don’t matter unless you’re a long term investor.
These are the S&P 500’s 1 month forward returns vs. its valuation (P/E ratio). Notice how there is almost no correlation between the stock market’s valuation and 1 month forward returns.
R squared = 0.008
These are the S&P 500’s 3 month forward returns vs. its valuation (P/E ratio). Notice how there is almost no correlation between the stock market’s valuation and 3 month forward returns.
R squared = 0.0255
These are the S&P 500’s 6 month forward returns vs. its valuation (P/E ratio). Notice how there is almost no correlation between the stock market’s valuation and 6 month forward returns.
R squared = 0.05
These are the S&P 500’s 1 year forward returns vs. its valuation (P/E ratio). Notice how the correlation between the stock market’s valuation and 1 year forward returns is weak.
R squared = 0.0765
These are the S&P 500’s 2 year forward returns vs. its valuation (P/E ratio). Notice how the correlation between the stock market’s valuation and 2 year forward returns is weak.
R squared = 0.0646
Macro Investing Model
The Medium-Long Term Model tries to predict reversals in the stock market. The Macro Investing Model doesn’t.
The Macro Investing Model looks for trends in the U.S. macro economy. Since the U.S. stock market and U.S. economy move in the same direction in the medium-long term, we can use macro economic data to help us time the U.S. stock market.
The Macro Investing Model combines a lot of different macro economic data in order to gain a holistic understanding of the state of the U.S. economy right now. It combines that holistic understanding of the economy into the Macro Index.
Here is a non-updated image of what the Macro Index looks like. We update the Macro Index regularly in the Bull Markets Membership Program.
Using the Macro Index, the Macro Investing Model assigns a trade and position size.
Here’s a chart of the model’s performance using $SPY (S&P 500, no leverage)
Access these models
Join our Bull Markets Membership Program to learn whether our models are bullish or bearish right now, and how they are trading the stock market right now.