SDS-SSO Model Update - July 29, 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: SDS-vs-SSO-20090729-subscriber.xls.zip - (or feel free to browse the directory.) 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 the S&P 500 index closed down slightly from the previous close for the 3rd day in a row. as i'll show below, the magnitudes of the SDS-SSO geodesic parameters are still very high and still increasing but their rate of change reversed sign (direction) for the first time in about 10 trading days. this is NOT an indication of market direction change, but shows the rate of growth in the index has slowed. when the parameters rates of change cross, then we have a market direction change. llook at the velocity of vector-c (denoted diff-c) for example below. at the far right, you'll see a slight dip in the rate of change. market directions changes do not happen over night, but to walk a mile you have to take the first step. in order to signal a market direction change, diff-c would have to cross the x-axis. that's quite a ways down yet from here. the chart of both geodesic parameter rates of change shows the same thing. the data above in blue is the exact some data below shown in magenta. on an absolute scale, theta sees the largest rates of change. but the geodesic chart itself shows the coordinates extending further out on the curve, but at a slower rate mind you. the last yellow dot is where the parameters coordinates are today. the amount of arc-length traveled per day is still very high and needs to come in a lot more if this will be a credible pull-back in early stage of development. my suggestion has been since monday to re-balance pairs trades to 50:50 and let it drift around for a few days until the market sorts itself out. no need to keep re-balancing to 50:50 if you've done it already. let the market decide who the winner will be and your pairs trade will bias itself in that direction. while it does this, the value of the pair will ultimately increase as the bias will have the higher RSI. if this does not materialize i will indicate so in a daily update or alert. best regards, mike james Managing Member Equity Informatics, LLC phone:302-220-3864