9 October 2017: A broken record

“S&P 500 breaks record run on jobs data”
“Wall Street fear hits a historic low as stock market scores rip-roaring records”
“Stock market ends at record levels after extending win streak”
“Wall St marches on to fresh highs”
“S&P 500 set to log longest streak of records in 20 years as stock market opens at all-time highs”
“The Bull Market Could Continue Forever”

It sounds like a broken record. One that has repeated the same groove for such a long time, we have now come to a point that it is all we can hear.
During after work drinks in their luxury wine bars, senior investors tell their junior colleagues stories. Stories about a time, long long before the needle became stuck in the groove. A time when this very same record played a totally different tune. To the junior investors, this all sounds a bit too bizarre. To them, this is just how the record sounds. How could there be another sound on it? It must be the wine that muddled the senior’s head. They go home and tomorrow, at the trading floor, the senior will be sober again.
Some day, somewhere in a luxury wine bar, someone will bang his fist on the table. And the needle will jump from its groove.

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A mixed jobs report caused markets to take a step back Friday. The Dow and the S&P 500 saw their streak of records interrupted, both logging minor losses of 0.01% and 0.11% respectively. The NASDAQ spent most of the trading session in the red, but was literally saved by the bell, when it closed with a tiny gain of 0.07% at an all-time-high of 6,590.18 points. All US indices posted solid gains in the first trading week of Q4. The S&P 500 was up 1.19% for the week, the NASDAQ 1.45% and the Dow 1.65%.
Volatility eased even further last week. The VIX opened the week firmly in the single digits and stayed there during the whole trading week, with the exception of Friday, when it temporarily broke just above the 10 handle during midday trading. Friday’s volatility spike was short-lived, though. The VIX closed at 9.65, 5% up for the day, after reaching an all-time intraday low record of 9.11. For the week, the VIX was up 1.47%.
UVXY ETFs went up more than 5% during Friday’s morning trading session, but saw almost all of it evaporate during the afternoon. UVXY ETFs closed at 18.42 (+0.05% for the day). XIV ETNs followed the exact opposite pattern, yet with a similar result: +0.03%.
Danny Daredevil saw his RSS decline even further. It now stands at 27%. Adventurous Anny is keeping a cash position, with her RSS at 9%. Solid Suzy and Lazy Larry still find themselves on the right side of the trade, with their RSS just above 54%.
None of our models gave a trading signal at the end of Friday’s session.

Model  Holds Start date

RSS

YTD

QTD

AAR

Danny Daredevil UVXY 1 January 2016

26.88%

-68.52%

-8.93%

14%

Adventurous Anny Cash 6 March 2017

9.22%

9.22%

0.67%

16%

Solid Suzy XIV 6 March 2017

54.11%

54.11%

5.35%

108%

Lazy Larry
XIV 6 March 2017

54.11%

54.11%

5.35%

108%

RSS = Return Since Start | YTD = Year-To-Date | QTD = Quarter-To-Date | AAR = Average Annual Return

 

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All elements are there. We are in Belgium. The time is early morning, on a weekday. We are on the highway. And the weather is very bad. But one thing is missing: the obligatory traffic jam. If René hadn’t seen this with his own eyes, he would never have believed it. He took the picture below to prove that it really happened.