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.
Dear Blogger, thank you! again for subscribing to the S&P 500 long/short ETF Model and welcome to new members who just joined and new list subscribers. today's analysis is available for download:
ignore the missing data error message that may pop-up when opening up the file. Excel for Windows looks for metadata that Excel for Mac doesn't generate.
if you ever misplace your login, send me a message using the email you originally provided when subscribing through paypal. visit the blog for an archive of all subscriber updates and alerts. the archive is search-able and comments can be posted by everybody. | | Today's Commentary
the S&P 500 index made a late day rally to close +1.36% for the day, +3.62 for the week & +5.31% for the month of may-2009. very impressive numbers.
with respect to the model, time is beginning to wipe off some dust from the rear view mirror. the PID-5 optimization algorithm is slightly missing the mark during the last week or so of trading. the may 20th neutral re-balance call may have turned out to be too early. also, the polarity chart used with PID-5 has been crossing signals back and forth while the RSI chart for each ETF has maintained bias toward SSO during this period of "no-mans-land" (range bound) trading.
on the other hand, the PID-7 optimization algorithm has been moving toward calling a neutral re-balance but is yet a little ways from crossing the x-axis which is consistent with trends in the S&P 500 index. PID-7 has signaled a polarity change for the ultra scenario but again perhaps a bit premature. the integral component "I" of PID-7 is on a similar trajectory as with the neutral scenario. so another 2 - 4 weeks of trading may reveal the better optimization algorithm.
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Dear Blogger, thank you! again for subscribing to the S&P 500 long/short ETF Model and welcome to new members who just joined and new list subscribers. today's analysis is available for download:
ignore the missing data error message that may pop-up when opening up the file. Excel for Windows looks for metadata that Excel for Mac doesn't generate.
if you ever misplace your login, send me a message using the email you originally provided when subscribing through paypal. visit the blog for an archive of all subscriber updates and alerts. the archive is search-able and comments can be posted by everybody. | | | Today's Commentary
no special comments today. the S&P 500 is consolidating. have to wait for the index to make it's move.
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Dear Blogger, thank you! again for subscribing to the S&P 500 long/short ETF Model and welcome to new members who just joined and new list subscribers. today's analysis is available for download:
ignore the missing data error message that may pop-up when opening up the file. Excel for Windows looks for metadata that Excel for Mac doesn't generate.
if you ever misplace your login, send me a message using the email you originally provided when subscribing through paypal. visit the blog for an archive of all subscriber updates and alerts. the archive is search-able and comments can be posted by everybody. | | | Today's Commentary
today's market action was indicative of "return of the jitters." why today beats me except the S&P 500 is up nearly 40% from the Mar-2009 lows. there's no rational right now in the market - has been in this condition for quite some time. fundamentals and reasoning has gone out the window like a puff of smoke.
both optimization algorithms are pointing to lower price action on the S&P 500. since reason is out the window, don't be surprised if the index rallies tomorrow or repeats last weeks and this weeks behavior thus far. remember, the model is not predictive. it is adaptive like a vehicle suspension system. the tuning charts are showing the model is adapting to changes in market conditions like the suspension system changes to road conditions.
without getting too technical, the model is passively adaptive as opposed to actively adaptive. active control systems anticipate changes in the system before they happen and prepares to make adjustments to stabilize the system in advance. active control systems have active elements in the system such as motors, hydraulics, pneumatics, fans and such that add energy to stablize the system. whereas springs, dampers and masses are passive which means they only transfer energy from one form to another. when metal bends, energy is converted to heat &/or stain energy if the metal is permanently deformed for example.
one way i get a feel for how the model is adjusting to changes in the S&P 500 index is through looking at the quantity i have defined vector c. as you might have guested, vector c is a resultant of adding two other vectors at right angles to each other. the other two vectors are the neutral weights of each ETF. using the Pythagorean theorem, i compute the magnitude of vector c. vector c gets distorted when there is uneven rates of change of each ETF. these distortions typical occur during rapid changes in the neutral weights to maintain equilibrium - equilibrium being the neutral pair value, consisting of SDS & SSO in our model, does not change.
as the sides of the triangle change in length, the resultant vector changes in length and angle. that angle is the arctangent of the 2 sides of the triangle. under normal trading conditions, theta is 45 degrees. i subtract theta from 45 degrees and get a picture of when SDS is changing faster than SSO for instance. i also compute the % rate of change of magnitude of vector c and i now have a complete picture and set of parameters to determine when it's time to re-balance and re-bias the portfolios. this is addition to the PID optimization algorithms.
i'm working on an illustration of the above and will have it marked up so you can develop a picture in mind as to the "motion" of the system. hope to have something to distribute in the next few days. | | |
Dear Blogger, thank you! again for subscribing to the S&P 500 long/short ETF Model and welcome to new members who just joined and new list subscribers. today's analysis is available for download:
ignore the missing data error message that may pop-up when opening up the file. Excel for Windows looks for metadata that Excel for Mac doesn't generate.
if you ever misplace your login, send me a message using the email you originally provided when subscribing through paypal. visit the blog for an archive of all subscriber updates and alerts. the archive is search-able and comments can be posted by everybody. | | | Today's Commentary
off to the races again. Some trends die hard such as the rally we are near the end of now. the buying we saw today in my opinion was a desperate attempt to grap more gains. the markets did the same thing last monday and finished flat for the week. the horrible housing data released today was totally ignored in favor of reported increase in consumer confidence. that's fundamentals for ya!
the PID-5 tuning indicator stayed below it's axis of oscillation but the polarity switched ever so slightly biased toward SSO. if the upward trend continues this week, PID-5 may very well indicate another re-balance and polarity will more than likely indicate a more definative re-bias to SSO.
the PID-7 tuning indicator moved back across it's axis of oscillation while RSI is still biased to SSO. it's possible we're either seeing the last gasps of this rally or we're going to be range bound for a while unless sellers begin to make their move.
besides these indicators, other points of data in the model still indicate we are pushing against extremes in the S&P 500. neutral weights for SDS & SSO are still near 15 month extremes. additionaly, vector c is still substantially elevated relative to historical values. i'll discuss this indicator in more detail in tomorrows update or a seperate update just for this purpose.
despite all the current mixed signals in the very short-term, i believe a more substantial broad market sell-off is in the offing. the S&P 500 index may go up a little more from here but this continued buying is untenable and unsustainable and may result in an extremely sharp snap-back this summer.
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Dear Blogger, thank you! again for subscribing to the S&P 500 long/short ETF Model and welcome to new members who just joined and new list subscribers. today's analysis is available for download:
ignore the missing data error message that may pop-up when opening up the file. Excel for Windows looks for metadata that Excel for Mac doesn't generate.
if you ever misplace your login, send me a message using the email you originally provided when subscribing through paypal. visit the blog for an archive of all subscriber updates and alerts. the archive is search-able and comments can be posted by everybody. | | | Today's Commentary
today's market action was lackluster at worst. at the open it appeared the markets didn't know if they wanted to go up or down but then the major indexes settled in positive territory for the majority of the day. then the markets sold off to slightly negative for the day and mostly flat for the week.
the PID-5 optimization algorithm has maintained it's signal for re-balance and the PID-7 algo is following suit. it's a matter of a couple more days of sloppy trading and PID-7 will indicate re-balance and a polarization change. look forward to a weekly summary and stats update later this weekend.
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Dear Blogger, thank you! again for subscribing to the S&P 500 long/short ETF Model and welcome to new members who just joined and new list subscribers. today's analysis is available for download:
ignore the missing data error message that may pop-up when opening up the file. Excel for Windows looks for metadata that Excel for Mac doesn't generate.
if you ever misplace your login, send me a message using the email you originally provided when subscribing through paypal. visit the blog for an archive of all subscriber updates and alerts. the archive is search-able and comments can be posted by everybody. | | | Today's Commentary
(for an independent analysis of today's action, please visit briefing.com/investor.)
the markets today did follow-thru with yesterdays selling right from the beginning of trading. the SDS-SSO model analysis using PID-5 optimization parameters has indicated a re-balance to neutral weights to maintain neutral performance. in addition, polarity has changed and bias has been shifted to SDS in the ultra perfromance scenario.
the models analysis using the PID-7 optimization parameters has not indicated a re-balance to neutral weights yet nor did PID-7 follow-thru by staying below it's axis of oscillation as it did yesterday. the PID-7 algorithm requires 2 consecutive trading days across it's oscillation axis to satisfy the criteria to declare re-polarization in the ultra performance scenario. so in the spreadsheet, the numbers show the re-balance based on the heretofore PID-5 optimization standard. the PID-7 charts are included for continued observation.
my interpretation of the data suggests that for the moment we are in a subjective no-man's land meaning the market still has potential to go either way, bullish or bearish. recall around APR-21 we were in a similar no-man's land trading range. if we linger here it might be an indication that buyers are still prone to buy on the dip as they have over and over since MAR-9 regardless of the news. pundits have been saying over and over that that kind of buying is unsustainable. well, the message never got to buyers. we just have to wait and see and be prepared for another buying spree if it comes. | | |
Dear Blogger, thank you! again for subscribing to the S&P 500 long/short ETF Model and welcome to new members who just joined and new list subscribers. today's analysis is available for download:
ignore the missing data error message that may pop-up when opening up the file. Excel for Windows looks for metadata that Excel for Mac doesn't generate.
if you ever misplace your login, send me a message using the email you originally provided when subscribing through paypal. visit the blog for an archive of all subscriber updates and alerts. the archive is search-able and comments can be posted by everybody. | | | Today's Commentary
for an independent analysis of today's stock market action, please visit the briefing.com/investor market update page.
the stock market in general was weak today posting negative gains on the Dow 30, Nasdaq composite and S&P 500. financial and tech stocks weighed the most on the indexes to negative territory.
the SDS-SSO model is beginning to indicate concrete changes in the S&P 500 index direction. the parameters indicating so are 1) the PID-5 tuning chart crossing it's axis of oscillation, 2) the polarity of SDS & SSO crossing their axis of oscillation, 3) the PID-7 tunning chart tied to the ultra scenario crossing it's axis of oscillation, 4) the magnitude of vector C has reached a local maximum with it's 1st derivative now crossing it's axis of oscillation. you have charts for 1), 2) & 3) in today's spreadheet update.
i want to see confirmation and follow-thru on the direction of these indicators before i call for a re-balance to neutral weightings for those following the neutral scenario and a bias change for those following the ultra scenario or your own hybrid between neutral and ultra performance. that confirmation should come following the end of tomorrow's trading. next week is a short trading week with U.S. markets closed for observance of memorial day on monday 5-25-09.
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| Dear Blogger,
just noticing the NYSE volume of trading is higher today than the past 2 days and the volume momentum is downward in direction as i write this alert. the markets were headed higher until about 10:30 am. keep a close eye out for potential acceleration of downside movement in the major indexes, in particular the S&P 500.
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Dear Blogger, thank you! again for subscribing to the S&P 500 long/short ETF Model and welcome to new members who just joined and new list subscribers. today's analysis is available for download:
ignore the missing data error message that may pop-up when opening up the file. Excel for Windows looks for metadata that Excel for Mac doesn't generate.
if you ever misplace your login, send me a message using the email you originally provided when subscribing through paypal. visit the blog for an archive of all subscriber updates and alerts. the archive is search-able and comments can be posted by everybody. | | | Today's Commentary
as the data in the spreadsheet shows, not much has changed in the model as a result of today's trading. for an independent analysis of today's market action, i direct you to briefing.com's market update page.
today's rather flat performance shouldn't have been too much of a surprise given yesterday's +3% run-up in the S&P 500 index. my interpretation of market behavior is bad news is no longer bad news, it's OK news. it's OK news because it's already baked in as the pundits say. "We already new this report was going to be bad, so it's OK."
no telling how long this disposition will prevail but i believe there's a high probability of it changing perhaps starting in July if new quarterly earnings results show little to no top-line improvement over Q1. the disposition of investors could also change if rising unemployment stats do not abate or the federal reserve says they are starting to see signs of inflation. these are just a few possibilities.
in the meantime, things are going fairly well with the performance of the model. perhaps a week or so ago i mentioned i'm considering introducing a new technical indicator to subscribers. the indicator essentially is a vector that is related to the amplitude of the squares of the neutral weights and will possess an angular directional component. the indicator analysis will also include tracking rates of changes of vector amplitude and angularity. this indicator will introduce some concepts of classical wave mechanics more directly into the analysis and uncertainty principles inherent with the quantization of waves. | | |
Dear Blogger, thank you! again for subscribing to the S&P 500 long/short ETF Model and welcome to new members who just joined and new list subscribers. today's analysis is available for download:
ignore the missing data error message that may pop-up when opening up the file. Excel for Windows looks for metadata that Excel for Mac doesn't generate.
if you ever misplace your login, send me a message using the email you originally provided when subscribing through paypal. visit the blog for an archive of all subscriber updates and alerts. the archive is search-able and comments can be posted by everybody. | | | Today's Commentary
well, the markets are back on their march upward, still, on not so good news. i have decided to cut my holdings of my hedged pair in half and will go long with QLD, UYG, DIG. there will still be a substantial amount of my portfolio that is hedged. but it doesn't look like the market is about to roll over anytime soon. the portion of my portfolio that is hedged will be weighted neutral. i will probably take profits near the end of this week and stay neutral over the weekend and repeat the same pattern next week unless the market gets spooked by something i can't imagine right now.
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Dear Blogger, as indicated in the summary of stats below, the S&P 500 index ended the week down with increased volatility for the week. the S&P has closed 8 up weeks out of the last 10 since the market lows in early MARCH.
several model indicators are pointing to weaker performance in the S&P 500. 1) the pid-5 PID tuning chart is looking to cross it's x-axis. 2) the SDS-SSO polarity chart is pointing toward a flip in ETF relative strengths backed up by the SDS-SSO RSI chart. 3) the proportional band in the PID-7 tuning chart has crossed it's x-axis. 4) the first derivative of the PID-5 tuning chart is approaching zero from positive territory. 5) SDS & SSO neutral weights are very close to annual all time extreme values 10 weeks after the last extreme at the low.
despite all these indications, the model still hasn't technically called for a re-balance as of friday 2009-05-15. also, the S&P 500 has made these similar indications 4 times already since the market low only to be a head-fake and began moving right back up instead of following through on indications. that's all technical analysis is: indications. however, this time the S&P 500 index has demonstrably moved down with an increase in volatility in the VIX. this week we may see continuation of a long awaited pullback in the preceding "bear market rally."
my course action will be to take a slightly bearish stance relative to the neutral weightings - that is a slight over-weight in SDS. that would be a weighting of about 65% SDS and 35% SSO. this is a good weight distribution to start with if the market does march downward. if this scenario unfolds, the pair weighting of SDS will automatically increase itself to minimize risk if the other scenario takes shape.
---SDS-SSO ultra scenario weekly stats --------------------------- * ultra tracking portfolio DOWN 7.88% for the week * ultra benchmark DOWN 7.78% for the week * ultra tracking portfolio UP 4.71% since inception 2009-04-28 ---S&P 500 Index weekly stats ------------------------------------ * DOWN 4.99% for the week * MFI finished nearly unchanged at 52.72 on a daily basis * RSI finished DOWN for the week to 52.72 from 68.18 on a daily basis * volume finished DOWN for the week to 2590891 * 62.63 pts (6.62%) BELOW it's 200 DMA * 50.93 pts (6.12%) ABOVE it's 50 DMA ---CBOE Volatility Index (VIX) weekly stats ---------------------- * UP 3.34% for the week * 10.64 pts ( 24.31%) BELOW it's 200 DMA * 5.83 pts (14.96%) BLEOW it's 50 DMA * RSI UP 43% from recent lowest level in early JAN-09 MFI - money flow index RSI - relative strength index PID-5 benchmark YTD performance record for neutral & ultra scenarios  PID-7 benchmark YTD performance record for neutral & ultra scenarios  perfromance an actual ultra portfolio of SDS & SSO vs. a spectrum of benchmarks explanation of legend in chart above: ultra benchmark - models analytical backtest performance trading SDS & SSO using the ultra weighted scenario ultra portfolio - performance of an actual portfolio of SDS & SOO tracking the ultra benchmark s&p 500 - performance of the S&P 500 index balanced neutral - models analytical backtest performance trading SDS & SSO using the neutral weighted scenario un-balanced - models analytical backtest perfromance trading SDS & SSO in a totally open-loop scenario (i.e. no re-balancing and no reset to neutral) QAI - the performance of the IQ Hedge Multi-Strategy Tracker ETF. click to see the fund profile as stated on yahoo! finance. | | | | |
Dear Blogger, thank you! again for subscribing to the S&P 500 long/short ETF Model and welcome to new members who just joined and new list subscribers. today's analysis is available for download:
ignore the missing data error message that may pop-up when opening up the file. Excel for Windows looks for metadata that Excel for Mac doesn't generate.
if you ever misplace your login, send me a message using the email you originally provided when subscribing through paypal. visit the blog for an archive of all subscriber updates and alerts. the archive is search-able and comments can be posted by everybody. | | | Today's Commentary
the weekend is getting late so i'm send out the data separately from commentary and my weekly stats report which will be forth coming this evening. | | |
Dear Blogger, thank you! again for subscribing to the S&P 500 long/short ETF Model and welcome to new members who just joined and new list subscribers. today's analysis is available for download:
ignore the missing data error message that may pop-up when opening up the file. Excel for Windows looks for metadata that Excel for Mac doesn't generate.
if you ever misplace your login, send me a message using the email you originally provided when subscribing through paypal. visit the blog for an archive of all subscriber updates and alerts. the archive is search-able and comments can be posted by everybody. | | | Today's Commentary
visit the link below for an independent analysis of today's market activity from briefing.com.
http://www.briefing.com/Investor/Public/MarketSnapshot/StockMarketUpdate.htm
i got a little backed up because tonight was my daughter's senior prom. had to make sure she & her date understood the rules. remember that tedd! oh, lord! has it been that long ago already? :-)
some are speculating that there may be a market pullback in the works. it looks like this could be happening based on the RSI chart of SDS & SSO and the polarity chart. it's not as clear though from looking at the PID tuning charts but keep a look out anyway. also the rate of change in the weightings is slowing and weights are near yearly extremes already after 10 weeks of this rally. that's too far too fast. so markets could be about ready to drop.
watch UYG or SKF as an intraday indication for downward movement as well as SDS & SSO. oil stocks are a bit overbought here so watch DIG & DUG also. if anything materializes intraday, i'll send out an alert once it's clear the type of volume that goes along with heavy profit taking is evident.
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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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