Weekly Update 12.1.24

In last week’s update, we noted an unusual bullish wave occurring at an unexpected point in our signal’s historical cycle. While this deviation was unprecedented, it turned out to be a favorable opportunity for those positioned bullishly in the market. This serves as a reminder that no model is flawless, and the possibility of model errors must always be accounted for when constructing a portfolio.

Looking ahead to next week, our model suggests a reduced probability of positive returns. The nominal probability of positive return is approximately 63% (as indicated by the dashed line on the chart), reflecting a long-term trend of positive returns in the market. This baseline probability slightly exceeds a 50/50 scenario due to historical market behavior. However, our quantitative model places the probability of positive returns in the 50% range for the tracked indices, signaling caution for bullish market participants. We are observing signs of early fatigue in the current market wave. If the market continues higher, the model projects modest gains in the range of 1% to 1.4%.

Disclaimer: The information provided here is for educational and informational purposes only and should not be interpreted as financial advice. I am not a licensed financial advisor, and my portfolio strategies may not align with your financial goals or risk tolerance. All investments carry inherent risks, including the potential loss of principal. Historical data and model-based projections are not guarantees of future performance. Please consult with a licensed financial professional before making any investment decisions.