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 17, 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.
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Today's Commentary
as i indicated in an update last week, i dropped SDS & SSO from the S&P 500 model and substituted SH & SPY instead. so much negative compounding resulted in SSO becoming inelastic and is no longer able to counter the action of SDS effectively. it just happens that if the market did not stop going up like it has today and friday, the pairs trade was in danger of picking up inertia and moving out of dynamic equilibrium. SH is 1X inverse the S&P 500 and SPY is 1X the index.
note as of today we have again the condition where the S&P 500 market sentiment has changed from bullish to bearish according the geodesics of the pair. the model does not indicate how long this will be the case so as always hedging would be wise. the spreadsheet contains the neutral weights for SH & SPY. the weights can be used the same way as before.
disclosures: as of midday today i positioned my pair 50:50 SH & SPY and plan to let the pair adjust their weights according to market direction whichever way it wants to go. as the index trends, the ETF with the highest RSI will determine the pair value and weight spread. in a downward trend, SH should increase in weight and move the pair value up from here.
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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.
Copyright (c) 2009 Equity Informatics, LLC. All Rights Reserved.
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