SDS-SSO Model Update - August 3, 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-20090803-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 well, based on my SDS-SSO geodesic model, the S&P 500 index appears to be "lost in space" and officially un-tethered from reality. for the bulls, this is a good thing. the geodesic parameters last week extended their positions well beyond it's most recent group of parameters. the yellow squares are the parameters coordinates over the last 15 trading days. the right most yellow pt corresponds to the coordinates as of EOD august 3, 2009. see below. the next chart plots the daily rates of change of the geodesic parameters. the slowing arc-length velocity seen above is confirmed by this data. very fast rates of change seen last week. if these 2 lines ever cross, that will be the models indicator that market sentiment has changed. in conjunction with this monday (aug-3-2009) mornings run up in the market, it is unlikely sentiment will be changing any time soon. finally, the scatter plot of the coordinates below are showing what i call "non-conformal plastic flow" or hysteresis. though the rates slowed down, they did not change along the same linear path as previous coordinates. this behavior may be indicative of how frothy the index has become. other than that, the full implications of this behavior is currently not known. disclosures: i started last week at 65% SSO & 35% SDS and i gradually changed the weightings so as to finish the week at 60% SSO & 40% SDS. this was a forced response to market changes. for the rest of this week, i plan to let the pair auto-adjust their weights. as long as the RSI of SSO stays > RSI of SDS, the pair weighting will become more biased to SSO and increase in value. i may put more money to work periodically at whatever weights the pair is at the time of the purchase. this should have little to no influence on their pairs "natural response" to the market changes. best regards, mike james Managing Member Equity Informatics, LLC phone:302-220-3864