Observations on Signal Sigma Strategies weekly positioning

As you’ll come to know, Tuesday is the day when all of our strategies rebalance their asset class holding weights. In this article we will cover changes to target allocations, as well as necessary scenarios in order to trigger trades.

Enterprise Strategy

Enterprise enters the trading week with a 100% CASH position. It is looking to deploy opportunistically into equities, but only up to around 59% of total portfolio value.

Since this model only trades 4 asset class ETFs, we use it to judge overall portfolio positioning. Right now, in order to successfully buy into SPY, we need to hold support at 429.07 (any close below that level will automatically deny a buy order).

SPY is not yet oversold enough to trigger a “bounce rally” type allocation here, so the only other signal left would be a short term positive MACD crossover.

Right now, the MACD indicator is in negative territory, although it could get more negative by week end. It all depends on earnings reports.

In this case, positioning becomes black or white. We either hold support, consolidate and eventually turn higher along with the whole market (which would trigger a substantial allocation), or we fail at support and decline further (which would leave us in CASH and possibly searching for other asset classes to own.

Nostromo Strategy

Similar to Enterprise, Nostromo is entering the week with a 100% CASH position.

It is looking to buy DIA ETF (instead of SPY) as it has more relative strength than SPY.

Essentially, this strategy is looking to “buy the dip” in whatever factor is outperforming the market in the current environment. And right now, DIA fits the bill.

Similar to SPY though, DIA is not yet oversold, needs to hold support at 338.49 and requires a positive MACD crossover in order to trigger a trade.

I suspect more consolidation is coming, as this market may have bottomed with retail bearish sentiment almost at all-time highs.

Horizon Strategy

Horizon is our most aggressive model. It is always looking to gain equity exposure.

This week though, Horizon orders a reduction in position sizes, by about 40%. That happens because general market conditions are turning bearish and risk is rising. This kind of portfolio needs to take defensive moves at certain points in order to offset it’s risk-taking nature.

Most of the companies in Horizon’s portfolio are sitting close to their respective all-time highs. On a technical channel, the group is sitting at around 0.35 Z-Score, which is remarcable given the overall market is at -0.85.

The group is not very volatile, nor is it expensive to own judging by P/Sales numbers. Overall, the Beta of the whole portfolio comes in at 0.56, with an average P/Sales of 5 and Sales Growth 2Y average at 14.5%.

“Reasonable” has become the new name of the game.

Another interesting tidbit is that the whole portfolio has no major sector or factor ETF correlation. Healthcare (XLV) comes close, at 0.45 as well as DIA, at 0.42.