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 4, 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 today's message will be short, again. nothing drastic conditions (no re-balances) are impending in the current model or the updated one i'm working to release. buyers have the reins right now and looks like more shorts got squeezed today. it's very possible the market will advance higher overall the week. this thursday may bring some change with new unemployment data for april-09 and bank stress test results. but given the way buyers have been ignoring reality, whatever thursday holds may not stop the buying. a small preview of what's in store with the upcoming model update. 1) the PID algorithm will be using new source data that seems to (based on backtest analysis) result in fewer re-balances for the neutral scenario and provides more accurate bias change indications for optimizing the ultra aggressive scenario. the neutral re-balance algorithm will sometimes add or subtract small amounts of money in and out the respective ETF holdings in the pair at the point of re-balance. this keeps a tighter neutral performance and the fund exchanges minimally change CAPM for the pair. the ultra scenario does not involve these fund exchanges. such fund exchanges will be clearly noted.
2) the polarity chart used to indicate ETF bias with the ultra scenario will be going away in favor of more accurate PID data and algorithm. ETF bias indications will entail using a special PID tuning chart for the ultra scenario. therefore each scenario will have it's own PID parameters and chart.
3) a significant reason for updating the bias indication algorithm has to do with the uncertainty principal associated with wave mechanics. the hedge model, using a long & short ETF, essentially obeys a wave equation which can be interpreted as saying the S&P 500 at any instant is going in 2 directions, simultaneously (e.g spring or rubber band.) therefore at any given instant, it's possible to measure what value the pair has (position) but another series of measurements are necessary to determine the direction of change (velocity). while the measurements are being taken, pair weights will be set to neutral to examine rates of change. this additional process only involves the ultra scenario.
portfolios tracking the neutral and ultra scenario are coming along well. a more formal update is forth coming. the neutral scenario pair value currently is $99.50 out of $100 initially invested. the ultra pair value is $109.3 out of $100 initially invested. investments were made on last tuesday and there has been no re-balancing to-date. i will report the actual purchase prices and lots sizes in the more formalized summary. | | |
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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