Summary
- Timing and momentum signals are crucial for outperforming passive benchmarks; relying solely on buy-and-hold can lead to missed opportunities and loss of valuable time.
- Current market signals show strong but weakening momentum in technology and semiconductors, suggesting caution and potential for near-term profit-taking.
- Record gains in SOXL semiconductors, Nvidia, and Industrials are highlighted with current selection signals and the latest market updates.
- Diversifying across sectors and adapting to signal changes enables strong risk-adjusted returns; harvesting uncorrelated risk premiums is key to long-term success.
- As Q2 earnings begin, the record volatility could rise again, as we have seen more +/- 2% daily moves in 2025 than in 2024 and 2023 combined.
Introduction
“The power of momentum is the ability to generate outsize returns that dwarf returns associated with passive benchmarks. Unfortunately, outsized expected returns deliver enhanced risks.” ~ Gray & Vogel, (2016)
Timing matters, and it matters greatly. I have spent the last 35 years trading, researching, and constructing algorithms to identify and leverage the value across fundamental, technical, and behavioral finance models. Of the ten portfolio models designed for optimal portfolio mixes for members to beat the market at Value & Momentum Breakouts, eight come from enhancing well-tested anomaly research in published financial journals.
If you believe, like I do, that there is much more to stock trading than just buy, hold, and hope that every future event works out perfectly as promised for your stock, then these trading models are for you. This article highlights some of our recent top trades from three very different portfolio models, ranging from aggressive short-term weekly breakouts to long-term growth and value portfolios with high dividends.
Three Trades from Different Portfolio Models
In this article, I provide a sampling of how we use the optimal portfolio models to identify long term continued strength, short term aggressive breakout stocks, and even apply timing models to long-term value stocks for the best results. As I repeatedly tell our investment community, it is important to not only diversify your stock selections, but it is also critical to be where the market flows are improving for the best returns. As many long-term traders know well and the chart below illustrates, it is very rare for one type of investment to lead in consecutive years. More details explain our process in my 2025 Market Forecast article. I am certain again this year that we will see more rotation, and if you are just riding the buy and hold approach, you can find yourself in a painful situation.
The S&P 500 Momentum Gauges
The S&P 500 gauge chart from May 2024 to July 2025 shown below illustrates over a year of signals in our proprietary model. These signals are important as we assess when the next market pullback may occur. We are currently seeing high positive MG values (green) weakening over the last several weeks while negative MG values (red) are coming back up from maximum low levels in several weeks of rising negative momentum. We will explore these signals in more detail with emphasis on Technology, the heaviest weighted sector by far on the major indices like the S&P 500 (SPY) and Nasdaq 100 (QQQ).
