what we do
Our focus is on the development of proprietary geodesic models that characterize the behavior of leveraged long/short ETFs in pairs trades using first principles of Hamilton-Lagrange-Euler mechanics. Because of tracking errors & daily compounding phenomena, equal weightings of leveraged ETFs in a pairs trade are virtually never 50-50. Daily data & graphics will show subscribers where neutral pair weightings have moved along the path of the pairs geodesic thereby providing multiple market direction & re-balance indicators.
SDS-SSO Subscriber Alert - April-12-2009
Dear Subscriber, i've been working overtime to get to this point where i can provide a brief summary of my analysis in the form of the chart below. while i was characterizing a control loop for neutral and maximum returns, i came up with the chart below. this is essentially a statistical process control (SPC) chart for the SDS-SSO paired ETFs. everything above zero (0) indicates that SDS is changing greater than SSO. everything below zero (0) indicates SSO is changing faster than SDS. the black line is the 12dma of the relative changes between the 2 ETFs. The blue line is positive (+) one-half (1/2) STDEV of the 12dma and the reddish line is negative (-) one-half (1/2) STDEV of the 12dma.  the area between the STDEV lines is like a no-man's-land. a good time to liquidate the pair and stay in cash until the 12dma line crosses through one STDEV line or another. all the way to the right is where we are now. the plot has been in SSO territory since the run-up starting about a month ago. the plot crossed the SSO STDEV line once already and came back through. definately a good time to be caution with SSO. the results of this derivation are very similar to the current model. for release, i need to neatly compile the data and state the trading rules to match the chart. i'll work on having that ready tomorrow. but for now, this is a good time to hold the pair in cash until we are more clear on the signals direction. one last note, the STDEV is collected from the black line data 11 days prior and up to the market close that day. it lags the black line by 12 days and the black line lags intraday by 12 days. on some days it may appear we are missing out on some good action. i think the data shows there's plenty of time for good action without being on the bleeding edge. also, the STDEV line adjusts with volatility and therefore provides a variable line of saftey. so when the slope of the black line increases, so does the line of margin. with steep lines comes huges changes in small time increments. more coming soon! (haven't we heard that recently? ;-) | | | | |
Disclaimer
Equity Informatics is a developer and service provider of proprietary financial equity pricing models & trading methods. The company familiarizes subscribers with the basic thesis of our models, provides subscribers with daily neutral pair weightings and methodologies on how to use the data as intended. subscribers shall not share any information obtained from equity informatics with any other party. use of these services are granted only to and intended for the benefit of the subscriber. Equity Informatics does not offer the sale of equities nor do our trading models constitute trading advise. It is incumbent on potential clients to perform due diligence and seek a professional financial adviser to help you determine whether subscribing to the company's services are suitable for your financial situation and level of risk. No guarentees of performance are expressly or implicitly offered nor does Equity Informatics guarantee the accuracy of market information used to provide model data to our client. equity informatics does not assume responsibility for lost principal, lost gains or tax consequences.
Copyright (c) 2009 Equity Informatics, LLC. All Rights Reserved.
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