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
in the last few trading days, the S&P 500 has managed to drift back up almost to levels prior to last monday's sell off. the rate of change of vector c has all but ceased meaning the S&P 500 in the short-term has slowed it's pace downward considerably. a conservative tweak to maintaining neutral would be to slightly increase the weight of SSO from it's neutral waiting. of course this would mean lowering SDS proportionally. all indicators except the RSI indicator are still signaling a slowdown in the S&P. so be prepared for erratic behavior for the remainder of the trading week. | | |
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 bulls came out in full force today creating sort of a short squeeze in my opinion. just remember this is near the end of the quarter and stranger things have happened around this period of the business cycle.
i want to point out two things. 1) there's been a pattern of toward the end of the last 3 months where things got bearish looking and then out of the wood works buyers start lifting the markets. 2) the relative strength indexes have criss-crossed suggesting a bias toward SSO in spite of the remaining model indicators looking bearish. if the buying is for real, these will begin to turn as well.
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| Dear Blogger,
the markets are poised to break out to the upside. this fits a pattern every 4 weeks for the last 3 months. apparently there are still lots of money on the sidelines. seemingly no firm wants to show clients they have a lot of money on the sidelines doing nothing. one day this false realism will stop.
| | best regards,
mike james
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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
though a little volatility during the day, today markets for the most part traded sideways. only the Nasdaq Composite closed significantly higher, however well off it's highs with heavy selling at the end of the day.
S&P 500 model indicators are still pointing to an SDS bias. the geodesic coordinates are continuing to march back toward the apex of the curve. watch for potential heavy selling in the next two trading days. markets are sitting at resistance levels from a month ago.
to say the S&P 500 is still headed down would require breaking below the resistance. if not, there could be a little bounce higher but not to the highs we've had around 950. perhaps a bounce to the 935 level and then start a new leg down in the market 3 - 4 weeks from now as Q2 reports start surfacing.
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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
the S&P 500 index did not change much from yesterday to today. the selling did not stop due to any fundamental change in the market. perhaps sellers are just waiting for the FOMC to announce their monetary & economic outlook at the close of tomorrows meeting at 2PM EST. anything is possible but i don't see anything the fed could say that will stop sellers from taking profits before the end of the quarter (a week from tomorrow). then i suspect we could sideways for a while till earnings reports start kicking in toward the second & third week in july. that's where the selling may stop or accelerate. we'll see. the model for time being still remains biased to SDS.
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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
we have reached a point where i'm comfortable to say the model is indicating a re-balance for neutral traded pairs only and a polarity change with a bias toward SDS for moderate to ultra performance (higher risk) portfolio scenarios. if your SDS-SSO pair is already biased to SDS above the neutral point, your already positioned for moderate or ultra performance. the degree to which you are bias SDS is a personal decision based on your tolerance for risk.
because the geodesic analysis is based soley on the neutral pair weights i derive, it will take precedence over the PID-7 algorithm for re-balance & polarity indications. therefore performance charts and data will reflect decisions to weight the pairs based on geodesic optimization. i will include the old PID-7 chart indicators in the spreadsheet for reference for a while. the PID-7 algorithms are approximations for what the geodesic gives us. the geodesic is much more precise and less dependent on judgement.
today the S&P 500 index rolled over like we haven't seen in a while. no telling how long or how intense the rollover will be. i'm working on some analytics based on using the geodesic to hopefully give us a better feel for answers to how long or how intense. so while the S&P 500 stays in this cooling off phase, oppurtunities lie in buying on the rallies.
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| Dear Blogger,
with the market taking breather from rallying for the last 3 months, the strategy i will follow is likely to buy the SDS-SSO pair on days when the market rallies. whichever particular weighting you choose to position your pair based on your tolerance for risk, overweight SDS. when the market rallies during an extended pullback, you will buy SDS cheaper. if you don't want to wait for the day to buy, perhaps overweighting SDS more so and schedule purchases when cash is available is a reason approach.
my current position is 70% SDS & 30% SSO. the pair will grow without purchasing which means the weighting of SDS will increase as the pullback extends. this is a conservative approach at this point because i'm not ultra weighted. just remember, as the price of SDS increases, the neutral pair weighting for SDS will decrease. i reference the weightings data in the spreadsheet.
here's an illustration, visualize ascending a ladder. each step you take up, the further you are from ground or equilibrium. risk rises but so does the reward. keep that in mind. this approach is satisfying when i maintain a good amount of cash on the sidelines in case i need to take profits and reverse direction. the cash is like someone holding my ladder for saftey as i ascend in risk. this strategy works in reverse, as we have seen, during extended rallies.
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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
a temporary cooling off period for the markets seems to be underway. at this point it doesn't look like the markets are posed to correct like a runaway train to. but the market has a ways to go to equilibrium. equilibrium is the coordinated of the apex of the geodesic. we're a ways from that point. we know the market will eventually get back to that point, it's just a matter of when now. | | |
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 U.S. stock markets in general are clearly showing signs of slowing down. even with today's bump up in the dow & S&P, the markets are very sluggish. the nasdaq closed lower and the other two indicies rolled over at the end of the day and closed well off their highs.
however, once again, stay cautious and vigilant. all kinds of equity swap contracts and what not expire tomorrow. if there's going to be a major change in volatility, it will be tomorrow. all the major indicators i track in the spreadsheet are saying the S&P 500 is in the early phases of a slowdown except the PID-7 neutral re-balanced indicator, though this indicator is sloped in that direction. but i don't think the slow day will last as long as the last one from early feb to mid march. the standard deviations i track in the price of the ETFs really haven't bouced around recently as prior to the last slow down. that's a hunch, we'll see what happens.
after seeing panic buying this time last month and the end of april, i'm not discounting a stealth buying rally starting all over again tomorrow. this time around i would have to conceede the probability of that happening is not as high this time. for one reason, the primary indicators have stayed in slowdown territory for 3 days now. vector c has shrunk 3 days in a row, diff c & diff theta are still on the other side of the x-axis and the ETF RSI are also at a crossroads.
note that the SDS-SSO geodesic chart has 2 series of data now. the blue series are the geodesic coordinates for the last 3 trading days. they're headed back to the apex and at an increasing rate; a decent "yellow light" a change in market direction is in the offing also given the fact that the lower leg of the geodesic is hyper-extended beyond the upper leg. keep an eye on those coordinates in the updates over the next week of trading.
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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 flat market performance helped helped indicators point more toward a declining S&P 500. but we are still essentially at the same point were a month ago when the S&P 500 index got to these very same levels and then buyers came rushing in like panic buying of the 1st order. i'm not ready to declare a new victory for the bears yet until selling picks up at a greater pace. i still want to see all indicators i track in the confirmation column before declaring a winner.
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| Dear Blogger,
i watch the market closely right after 11 am & 2 pm EST as many institutional trades are made. so far sellers are keeping a lid on upward motion. very interesting to watch. but investment banking house trade all throughout the day and can dramatically lift or lower the market in the last 15 minutes of trading. between now and then we will have a better gauge as to who has the most conviction.
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Dear Blogger, so far so good on S&P 500 price movement. still be watchful of a head fake of the kind we've had this time of each month since market lows in march. the chart of the VIX below illustrates my point. near the 3rd week of each month the VIX managed to get to hop over it's middle bollinger band and never puch through to the upper end. right now the VIX just bounced off it's 50 MDA and recoiled downward. could be another re-peat scenario. be ready for possible explosive move up.  | | | | |
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 amplitude of vector c shrunk and the most recent coordinate on the geodesic line moved back toward the apex. diff c & diff theta met and crossed each other which is a clear sign of systemic contraction in the S&P 500. in normal trading conditions this would constitute a signal to re-bias ultra pair portfolios and possibly re-balance neutral pair portfolios.
the market rally has been hyper-extended buy irrational buying on dips since the market rally began in mid-march 2009. if there is any more appetite for buying, i would expect to see buyers come out of the wood-works tomorrow. on the other hand, the RSI indicator for SSO & the S&P 500 have crosed below 50% for the first time since the february 2009 market swoon. so there's plenty to be caution about right now.
the PID-7 indicators are still lagging the rates of change in the geodesic. vector c shrunk a few days in a row about a month ago in may only to have buyers lift the market to it's most recent high of ~946 just last friday. what i want to see now is the neutral portfolio performance line dip below 100% ideally before calling an office change in market direction. i also want to see both PID-7 re-balance indicator cross the x-axis.
so here's what i'm doing now. i've decided to reset my portfolio to neutral. the neutral weightings are already biased toward SDS so if the market goes down, the weight of SDS will increase from here and SSO will decrease. i plan to incrementally add funds in my portfolio at the whatever weight distribution are set when i buy BOTH ETFs. if the weighting of SDS has drifted up to 70%, i will add 70% of my funds to SDS & 30% of my funds to SSO. if the market continues to slide downward, the weight of SDS in the portfolio will continue to increase.
when the scenario above takes place, don't be confused by the change in direction in the neutral weights the model outputs and the actuall weights of the ETFs in the portfolio. remember, when the market slides down the price/share of SDS will increase. at the ed of each day the neutral weights will shift the weighting of SDS down to maintain neutral equilibrium. once i set my pair to neutral and the market continues to slide down, i will not re-balance back to neutral which will defeat the objective. i will let the weights of the portfolio take care of themselves and periodically add new money at whatever weight distribution the pair is presently at the time of purchase.
hope this little bit of strategy helps.
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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
with today's sell-off, the SDS-SSO indicators are once again pointing to a market direction change. we've had this condition several times since the market lows in mid-march '09. look at the RSI chart. vector c, which is a less prone to false indications, even anticipated a direction change last month around this time. then the buying came back with a vengance.
a few things to keep in mind this time. several large U.S. banks with large TARP contributions from the federal government passed the govt's stress test a month ago and last week recieve OK from the treasury to re-pay their TARP. combine that with the fact that we are roughly 2 weeks away from the end of Q2-2009 and we have a situation ready for earnings window dressing to take place. anticipate the possibility that a market correction of sorts is right around the corner.
the plot of the magnitude/amplitude of vector c is flattening off and note the last point on the geodesic is closer to the previous point which indicates some slowdown in the S&P 500 rate of growth. also look at the chart plotting the rates of changes for the geodesic parameters. the lines are pointed toward each other indicating sluggishness as well. if those line meet, according to the model the event will trigger a prompt to re-bias high beta oriented pair position & re-balance a nuetral pair position if you have any. keep close eye on the commentary this week.
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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
the parameters of and the geodesic model i defined for SDS-SSO, i believe, characterizes the most optimum indication for re-balancing and re-biasing a viable pairs trade using these 2 ETFs. the PID models have provided decent approximations for the information contained within the geodesic. so going forward, the PID-7 indicator charts will be included for reference and desicions to re-balance and re-bias will be left to looking at the characteristics of the geodesic and the chart plotting the 1st order rate of change of vector c & the angle theta. i will spend more time this week illustrating graphically how i derive these parameters and what they mean for trading. again, the model is not a chrystal ball but it does describe how the system behaves under changing boundary conditions.
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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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