Changes to Risk Logic
Markets know how to tell you that you haven’t covered all the combinations of risk. The Weekly Trend program was an example. We had a huge rally and gave back most of it. That’s not want we wanted to do.
We’ve changed the risk logic to capture large gains and reset the positions when volatility falls. We did that in all the program, even though it did not affect the current portfolios. There is always a “next time” with the market more volatile than in the past.
AUGUST Performance in Brief
A relatively quiet month, with mostly profits and some losses. The benchmark trend program is lagging behind the major index markets, but many of the other programs are well ahead of the index markets. The DowHedge, High-Risk, and the Weekly programs are the high spots.
Investors are likely to reenter the market in September, and the election in November should produce some interesting moves, usually to the upside.
In-Person Appearances
Perry has an intense schedule for September and October.
- September 3: A FREE webinar with Perry and Kevin Davey on the Kaufman Adaptive Moving Average and the Efficiency Ratio.
- September 19: Key speaker at the SIAT (Italian Technical Analysis) anniversary meeting.
- September 24-26: Kevin Davey and Perry hold a 3-day conference’
Anyone interested in further information should go to the MasterClass Website at https://buy.stripe.com/cNi9ATc0FcIt2Xgg6tfbq2j
- October 19: Perry is a key speaker at the IFTA-STA conference in London.
Kaufman’sMost Popular Books (available on Amazon)
Trading Systems and Methods, 6th Edition. The complete guide to trading systems, with more than 250 programs and spreadsheets. The most important book for a system developer.
Kaufman Constructs Trading Systems. A step-by-step manual on how to develop, test, and trade an algorithmic system.
Learn To Trade. Written for both serious beginners and practiced traders, this book includes chart formations, trends, indicators, trading rules, risk, and portfolio management. You can find it in color on Amazon.
You can also find these books on our website, www.kaufmansignals.com.
Blogs and Recent Publications
Find Mr. Kaufman’s other recent publications and seminars at the end of this report. We post new interviews, seminars, and reference new articles by Mr. Kaufman each month.
Major Equity ETFs
All the major index ETFs gained in August, although it’s hard to tell on the charts. If you don’t look at Nasdaq (QQQ) you can still see a slight upwars move. Considering the level of infllation, especially in gas prices, the market is hold up well. If I had to venture a guess, it will contue higher.
A Standing Note on Short Sales
Note that the “All Signals” reports show short sales in stocks and ETFs, even though short positions are not executed in the equity portfolios. Our work over the years shows that downturns in the stock market are most often short-lived and it is difficult to capture with a longer-term trend. The upwards bias also works against shorter-term systems unless using futures, which allows leverage. Our decision has been to take only long positions in equities and control the risk by exiting many of the portfolios when there is extreme volatility and/or an indication of a severe downturn.
PORTFOLIO METHODOLOGY IN BRIEF
Both equity and futures programs use the same basic portfolio technology. They all exploit the persistence of performance, that is, they seek those markets with good long-term and short-term returns on the specific system, rank them, then choose the best, subject to liquidity, an existing current signal, with limitations on how many can be chosen from each sector. If there are not enough stocks or futures markets that satisfy all the conditions, then the portfolio holds fewer assets. In general, these portfolios are high beta, showing higher returns and higher risk, but have had a history of consistently outperforming the broad market index in all traditional measures.
PERFORMANCE BY GROUP
NOTE that the charts show below represent performance “tracking,” that is, the oldest results since are simulated but the returns from 2013 are the systematic daily performance added day by day. Any changes to the strategies do not affect the past performance, unless noted. The system assumes 100% investment and stocks are executed on the open, futures on the close of the trading day following the signals. From time to time we make logic changes to the strategies and show how the new model performs.
Groups DE1 and WE1: Daily and Weekly Trend Program for Stocks, including Income Focus, DowHedge, Sector Rotation, and the New High-Risk Portfolio
The Trend program seeks long-term directional changes in markets and the portfolios choose stocks that have realized profitable performance over many years combined with good short-term returns. It will hold fewer stocks when they do not meet our condition and exit the entire portfolio when there is extreme risk or a significant downturn.
Equity Trend
The Weekly Trend is the reason for our new risk logic. Even though we capture some gain from the big run-up, we should have done better. The new risk rules are likely to help that. August returns were small and mixed. The market always keeps us on our toes!
Income Focus and Sector Rotation
Another month of indecision at the Fed, and it’s looking that rates might rise. This program benefits from falling rates, so we may have to wait longer. Meanwhile, both programs are holding small gains for the year, which is good given the fundamentals.
Weekly Sector Rotation
Small gains in August but higher by nearly 12% in 2026, putting it in line with the S&P. I watch this performance daily and it seems to be uncorrelated to the major index markets. That turns out to be good for a hedge.
DowHedge Programs
If you look back at the Major Index chart, the Dow seems to be the steadiest performer, even if it is below the other index markets. Our DowHedge program takes the best of the Dow. This month it was higher by 4.3% and 5.1% for a net gain of 22% and 26%. Hard to argue about that.
High-Risk Portfolios
This program has done well this year, even with considerable volatility. It is now higher by 75% and 49% in the 5 and 10 stock portfolios. Although this month it did essentially nothing. Better than losing money. We’ve also added out new risk rules to this program.
Group DE2: Divergence Program for Stocks
The Divergence program looks for patterns where price and momentum diverge, then takes a position in anticipation of the pattern resolving itself in a predictable direction, often the way prices had moved before the period of uncertainty.
Another month of small gains and losses, but hold higher by 19% this year.
Group DE3: Timing Program for Stocks
The Timing program is a relative-value arbitrage, taking advantage of undervalued stocks relative to its index. It first finds the index that correlates best with a stock, then waits for an oversold indicator within an upwards trend. It exits when the stock price normalizes relative to the index, or the trend turns down. These portfolios are long-only because the upwards bias in stocks and that they are most often used in retirement accounts.
A nice move in Equity Timing of more than 7% puts this program into the black. In addition, the chart below looks promising.
Futures Programs
Groups DF1: Daily Trend Programs for Futures
Futures allow both high leverage and true diversification. The larger portfolios, such as $1million, are diversified into both commodities and world index and interest rate markets, in addition to foreign exchange. Its performance is not expected to track the U.S. stock market and is a hedge in every sense because it is uncorrelated. As the portfolio becomes more diversified its returns are more stable.
The leverage available in futures markets allows us to manage the risk in the portfolio, something not possible to the same degree with stocks. This portfolio targets 14% volatility. Investors interested in lower leverage can simply scale down all positions equally in proportion to their volatility preference. Note that these portfolios do not trade Asian futures, which we believe are more difficult for U.S. investors to execute. The “US 250K” portfolio trades only U.S. futures.
Small losses keep this program holding losses for the year. Although we’ve changed the risk parameters, that helped in passed year, but nothing seems to help this year. It’s one of the frustrating profiles of a futures trend program – good years followed by nothing. We’ll see if the November election perks up performance.
Group DF2: Divergence Portfolio for Futures
Small gains in all portfolios and modest losses for the year. Perhaps this is the bottom of the sell-off. We’ll keep watching it.
Blogs and Recent Publications
Perry’s books are all available on Amazon or through our website, www.kaufmansignals.com.
In person appearances:
Perry has an intense schedule for September and October.
- September 3: A FREE webinar with Perry and Kevin Davey on the Kaufman Adaptive Moving Average and the Efficiency Ratio.
- September 19: Key speaker at the SIAT (Italian Technical Analysis) anniversary meeting.
- September 24-26: Kevin Davey and Perry hold a 3-day conference’
Anyone interested in further information should go to the MasterClass Website at https://buy.stripe.com/cNi9ATc0FcIt2Xgg6tfbq2j
- October 19: Perry is a key speaker at the IFTA-STA conference in London.
August 2026
A new article in Technical Analysis of Stocks & Commodities, the September issue, “Using Skew and Kurtosis.” Not really as complicated as it sounds, and offer good returns and a different look at the market.
June-July 2026
Given the rallies in Silver and Crude, Perry published “Exiting the Trade: How To Avoid Being The Greater Fool.” Sometimes exiting sooner is the best choice. Read the article in the July issue of Technical Analysis of Stocks & Commodities
May 2026
Perry’s article “What We Can Learn From Drawdowns” was published in Spain,
April 2026
A new article, “The Crack Spread” in Technical Analysis of Stocks & Commodities, for those interested in trading crude and its products.
February 2026 / March 2026
An interview with Tim Slater, one of the movers in technical analysis, written by Barbara Diamond. We don’t give enough credit to those that formed the industry.
December 2025 / January 2026
The January issue of Technical Analysis of Stocks & Commodities has Perry’s latest article, “Smoothing the Data.” He looks at a wide variety of smoothing techniques and finds that the moving average is not the best!
October 2025
An article in Technical Analysis of Stocks & Commodities (the November issue) on “Low-Priced Stocks: A Golden Opportunity or an Unreasonable Risk.” You can take a guess or read the article!
As mentioned in the Close-Up, this was a follow-up on the article published in Seeking Alpha on October 25th, “How To Hedge the U.S. Dollar: Gold, Bitcoin, or Whatever?” This version included some portfolio allocations, which should help.
September 2025
No articles in September, although Perry has committed to being the Keynote Speaker at the Society of Technical Analysts (STA) when it hosts the IFTA conference in October 2026 (not this year!)
Perry also addressed a Spanish class where they are building algorithmic strategies. Called ROBOTRADER, it in ETSIT-UPM (Escuela Técnica Superior Ingenieros Telecomunicación- Universidad Politécnica Madrid). The presentation is about Diversfication (in English) and available on youtube.
Older Items of Interest
Perry did a studio interview with Jeff Baccaccio (“Rfactory”) in London in March 2025. It is a fine production and a good interview. He has put it on youtube. I hope you enjoy it.
YouTube: https://youtu.be/jmR359jHYBQ?si=IHQ5bVLijGFM19qF
Perry was interviewed on June 27, 2024 by Simon Mansell and Richard Brennan at QuantiveAlpha (Queensland, Australia), a website heavy into technical trading. It appears on their website.
On April 18th, 2023, Perry gave a webinar to the Society of Technical Analysts (London) on how to develop and test a successful trading system. Check their website for more details, https://www.technicalanalysts.com..
Perry’s webinar on risk, given to the U.K. Society of Technical Analysts, can be seen using the following link: https://vimeo.com/708691362/04c8fb70ea
For older articles please scan the websites for Technical Analysis of Stocks & Commodities, Modern Trader, Seeking Alpha, ProActive Advisor Magazine, and Forbes. You will also find recorded presentations given by Mr. Kaufman at BetterSystemTrader.com, TalkingTrading.com, FXCM.com, systemtrade.pl, the website for Alex Gerchik, Michael Covel’s website, TrendFollowing.com, and Talking Trading.com.
You can address any questions to perry@kaufmansignalsdaily.com.
© August 2026, Etna Publishing, LLC. All Rights Reserved.