The Model. Effective the market close last Wednesday, April 17, the KP Equity Trend Model shifted to a Yellow status — reduced exposure to US equities.
From the Trading Room. The Intermediate-Term Trend Model (KP-1) has shifted to negative — its first change of direction this year. The sharp decline in the red Model Line (below) reflected a significant acceleration of downward internal pressure last week.
Among other things, this change shifted the equity exposure of our active large-cap US portfolio to 50% equities and 50% fixed income.
Over the last 20 years, this model has changed directions an average of 5.2 times a year. Whenever it calls on us to make major shifts, we remind ourselves that, the signals have been exceptionally robust in real time for almost two decades, but this fact doesn’t rule out the occasional signal that is less than perfect in hindsight.
The winning strategy is to follow all the signals.
