Hari Seldon Trader

and his trading model for long-term investors


New wave of contagion worldwide will hit markets?

Status of the economy on November 1st: macro data

One month ago we were writing about the recovery of the US economy, after the impact of Covid-19 in Spring 2020.
These were our conclusions (October 4th):

"The above macto data tell us this kind of story: the US economy did not enter into a deep recession, mainly because of the quick intervention operated by the FED.
Economy is recovering quickly, but not as quickly as the financial markets did, so the distance between real economy and financial markets has gone wider


Now there are three factors driving the market, three forces which are now stalling in an unstable equlibrium:

  • the economy recovering is pushing to a new bull market
  • the possible rise of Covid-19 cases worldwide and new possible restrictions or lockdowns could invalidate the previous point
  • indexes are still overpriced, when we compare the corporates profit expectations with actual prices

During such unstable periods, markets are really hard to predict, because there is no definite trend going.
The illness of the US President, or any other news like that, could turn the course of events in one direction or the opposite.
Being actually positioned CASH, from a selfish point of view, we should hope that a further correction brings prices down, and let us enter Long at lower prices for a more stable bull market."

One month later

October has been the worst month after March 2020, mainly because of the rise of Covid-19 cases worldwide.

We cannot measure yet this change in the US economy, because data is published with some delay, but we are seeing already housing market, inflation, yields curve getting worse, while labor market could drop soon in (the likely) case of new restrictions to theatres, sports, restaurants and bars.

In April-June we have experienced a strong recovery of markets, driven by few tech-giants, who took advantages of the Covid-driven economy, but their increasing profits are not proportional to their execptional rise of valuation. Most of it was due to the excess of money pumped by the FED

The whole picture is well represented by our "HST Fundamental Indicator", which summarizes many macro data in a single index, which has been very good at identifying recessions and stagnant periods of the economy during last decades.


The HST Fundamental Indicator has been negative since April 2020, and, despite the "V" recovery of S&P500, it is still negative.

The case of a "second wave" of Covid contagion is already reality in Europe and many other countries. USA are not far from it, and there is no certainty of a vaccine to be approved, used on large scale, and widely effective for some more time.

Moreover, we cannot immagine what FED could invent to cancel these fears of financial markets, at least in the short term.

An addtional signal alert for stock indexes is the rise of volatility: the VIX index has constantly been elevated during last two months, and the VIX Futures Term Structure is currently in "backwardation" (courtesy from, which is the typical shape you have when a correction is on.

That being said, we fear a further drop of financial markets during next weeks, which might be an opportunity to re-enter later for a stronger bullish leg, when stock prices will be lower, and when the chances for a more solid and durable recovery will be in place.



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Who is Hari Seldon

(from Wikipedia)

Hari Seldon is a fictional character in Isaac Asimov's Foundation series.

In his capacity as mathematics professor on the planet Trantor, Seldon develops psychohistory, an algorithmic science that allows him to predict the future in probabilistic terms. On the basis of his psychohistory he is able to predict the eventual fall of the Galactic Empire and to develop a means to shorten the millennia of chaos to follow. The significance of his discoveries lies behind his nickname "Raven" Seldon.

Our team decided to dedicate this work and this model to this amazing character, creating the even-more-fictional character of "Hari Seldon Trader".