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.
S&P 500 Model Update - August 12, 2009
| | as mentioned in yesterday's subscriber commentary, SSO has undergone undergone negative compounding & tracking error over the last year. it may soon not be possible to maintain SDS & SSO in equilibrium by adjusting only the weights of the pair. this introduces 2 complications. 1) if the market continues to skyroket higher, the pair will become dynamic as SDS declines and begins to drag down the pair with it. 2) if the market were to roll-over, which i think is an increasing likelyhood, SSO will undergo more "non-coformal" plastic flow which will render the ETF flat with very little to no elasticity to come back and balance the pair.
therefore after considerable review, i will continue my analysis of the S&P 500 index using SH instead of SDS and SPY instead of SSO. the substitution of the ETFs will change the magnitudes of the geodesic paramters but most of the important relationships between rates of change will stay intact which is the most valuable portion of the analysis anyway. for example, using the new ETFs the points in time when the rates of change of the parametric values cross is virtually identical to using the 2X levered ETFs. the crossing of these variables signal an indication index sentiment has changed.
finally, despite today's run up in the S&P 500, the probability of sentiment moved higher today than where it was yesterday using both geodesic models. this is not a prediction, just an increasing likelyhood the S&P 500 is in the process of topping out for a while.
stay tuned for more updates. | | |
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.
Posts
No comments:
Post a Comment