STRATEGY UPDATE | JULY 24, 2026

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Trading System Signals and Portfolio Review

A difficult trading week highlighted the importance of strategy diversification, market-regime awareness, and disciplined drawdown management.

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A Difficult and Noisy Market Environment

Last week was one of the more difficult periods we have experienced across the portfolios. The stock indexes repeatedly resisted the downtrend, but the buying pressure was not strong enough to produce a sustained upside move.

Tariff developments, geopolitical headlines, and corporate earnings contributed to rapid shifts in market direction. The result was a noisy environment in which both bullish and bearish moves frequently stalled before developing into meaningful trends.

This type of market can be particularly challenging for strategies that depend on clean continuation, persistent momentum, or a strong rebound after an intraday reversal.

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Diversification Made a Difference

The 18 System Portfolio NQ was a relative highlight and generated a positive hypothetical result for the week.

Tick Reversal, Momentum Reversal, Open Range, the Cobra strategies, and EVP-1 were among the systems that navigated the market noise more effectively. Several are established strategies that have traded through many different market environments, illustrating why a portfolio can benefit from combining systems with distinct entry logic and market assumptions.

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Evaluating a Strategy During a Drawdown

Drawdowns are difficult, but they can provide important perspective when evaluating the timing and risk of a strategy allocation. V-Reversal with the Accelerated Trailing Stop Loss is currently in a hypothetical drawdown of approximately $19,400, compared with its historical maximum drawdown of approximately $24,200.

The chart below shows the current drawdown in the context of the strategy’s historical equity curve and previous drawdown levels.

Psychologically, it often feels easier to begin trading a strategy after a winning streak. Recent performance creates confidence, while a losing streak creates uncertainty. This tendency can cause traders to begin near an equity peak and abandon a strategy after much of the drawdown has already occurred.

Entering after a drawdown may offer a different risk profile relative to the strategy’s previous equity high, but it does not guarantee an immediate recovery. A historical maximum drawdown is not a fixed limit, and every strategy should be expected to establish a new worst-case drawdown at some point in the future.

The relevant question is not simply whether a strategy is currently losing. The more important question is whether its current behavior remains consistent with the risks, market dependencies, and drawdown characteristics identified in the original research.

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Why V-Reversal Has Been Challenged

Dip-buying activity has remained present, but it has recently lacked the strength needed to produce large and sustained rebounds. This partial buying support has made aggressive short entries more difficult while also preventing some long V-Reversal trades from reaching their profit objectives.

By contrast, systems designed to short weakening rallies have recently been better aligned with the market’s intraday behavior.

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Tick Reversal and Momentum Reversal

The chart below shows examples of Friday’s trades from Tick Reversal and Momentum Reversal. Both systems are included in the 18 System Portfolio NQ .

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Related Portfolio Research

We recently published an analysis of strategy uniqueness, portfolio correlation, and out-of-sample performance.

Read: Portfolio Correlation Studies and Out-of-Sample Analysis

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Concentration Versus Diversification

The 25 System Portfolio was developed to emphasize historically strong strategy families, particularly V-Reversal and Gap Continuation, by combining multiple variations of each approach.

That concentration can be beneficial when those patterns are strongly aligned with the market. It can also amplify portfolio drawdowns when several related strategy variations are challenged simultaneously. V-Reversal is currently trading near its historical worst-case drawdown, while Gap Continuation has generated fewer signals because its preferred market pattern has appeared less frequently.

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Hypothetical Trading System Signals

Friday, July 24, 2026

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Risk Disclosure: Hypothetical performance results have many inherent limitations. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown. Actual results may differ materially from hypothetical results. Futures trading involves substantial risk and is not suitable for all investors. Past performance, whether actual or hypothetical, is not necessarily indicative of future results. Drawdown figures are based on end-of-day calculations and do not reflect intraday drawdowns. Only risk capital should be used for futures trading.