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 Model Update - May 11, 2009
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 gapped down at the open and pretty much stayed negative to the close with a 2.15% loss for the day.
among the charts in the update is a new chart comparing the relative strength index (RSI) of each SDS & SSO. notice the similarity between this chart and the polarity chart. almost a spitting image. RSI for SSO has been hovering around 70 for the past week or so and bounced down to 61.90 by EOD. this doesn't mean a reversal is in progress but SSO is overbought if RSI is 70 or greater. the YTD high for SSO of 69 was on may-6-09. the previous high was 63 on April-17-09.
one more chart i included is the weighting of each ETF and a value "C". C is the magnitude of a vector that is directly related to the weightings of each ETF. C doesn't change greatly but when it does, there's reasonable bias development in the pair. i'll explain more on C in the future.
Conclusion
RSI for SSO has recently been near overbought conditions and weights are near extreme values. if the rally continues as it has since the end of April, a significant reversal is in the offing. when? ah, the 50 million dollar question. if you are long SSO only or extremly biased to SSO paired with SDS, consider upping your SDS weight some.
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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.
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