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
even with the tiny move up in the S&P 500 index today, the model indicator switch back to a weak bearish bias. but i don't think it will vacillate much longer. since june 16th the market has been more bearish than bullish. when i look at the RSI plots of SDS & SSO, the indication now in retrospect has been a directionless market. sentiment on the street is rapidly changing indicated by the VIX dropping from a high of 33 to 25.02 in 5 trading days. that's roughly a 32% change. i have added a new time series on the geodesic chart starting with coordinates from today's data. the new time series data is annotated in yellow squares. see below. tomorrow i will update the cooresponding scatter plot of the paramters rates of change to coincide with this new time series and include it in the spreadsheet from here out. unlike the last time few times when the direction bias changed for a day and flipped right back, my sense is the market is about to make a fast move up in the short-term. this judgment has more to do with how earnings results have been beating to the upside. even though reporting just got started, i don't see anything at this point that will change the current optimism. so consider curtailing (not eliminating) whatever hedges you have to the downside. the model will have to catch-up with the market. watch the time series on the above chart progress in future updates. | | |
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 the 2.5% run-up in the S&P 500 index today, the models geodesic parameters crossed over which is an indication of market direction change. the RSI indicator plot in the spreadsheet shows a similar confirmation in market direction change. lastly, coordinates in a scatter plot (not included in the spreadsheet but included below) of the geodesic parameters time rate of change shows a change in quandrants, another indication of market direction change. therefore the model is indicating a weak bullish bias in the S&P 500. the coordinates that moved into the 4th quadrant are shown as a blue asterisk. there is one other point there from 7-1-09 when the index popped but went back down. having said all that, the S&P 500 index moved in lock-step with a pattern that has repeated several times since the end of apr-2009. observe the following dates in the chart below: 4-20-09, 5-26-09, 6-24-09, 7-13-09 during expiration week, the S&P 500 index began new rallys. and each time the rally was less intense and shorter in duration. the question is will the pop in the index today repeat this pattern, less intense and shorter in duration. if so, this rally may last 3 - 5 trading days max. therefore consider building a small position in SDS over the next few days. stop accumulating if the price drops below $54.7 - $56.0 and then hold. if the pattern holds, you should be able to unload the hedge in a week or 2 for a small gain. | |
|
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
again, very little change in EOD performance in the S&P 500 index. model indicators are still bearish on the index. stay cautious and keep accumulating as much cash as possible. the index will not keep going sideways like this forever.
i have a few comments on the overall state of the S&P 500 index according the model. the model shows that the index is still "over-wound" to the upside and has more room to go down than up. sure, anything is possible. in my opinion, going up from here would require a huge amount of conviction that businesses in the index will not only beat but exceedingly beat their projected Q2 earnings and outlook would have to be nothing but rosy. secondly, global demand for products and services would have to be at all time highs in order to provide the index additional potential to run up another 20% or more from here over the next 4 - 6 weeks.
the index is "over-wound" from this perspective. just like the natural seasons we experience on earth, economic, business & indexes have defined seasons as well. those seasons are not as regular and smooth as the earths, but they exist. no matter how long an economic cycle stays in a particular season, the economy must follow a series of defined seasons in the same order in order to stay viable. the SDS-SSO geodesic is a reflection of what season the S&P 500 index is in and what season is coming next.
the geodesic coordinates seem to be saying to me the S&P 500 index is an early stage of decline as it is retracing it's path back toward the other extreme. the assumptions i have made in constructing the geodesic model for the S&P 500 are based upon the premise that seasonal index changes maintain continuity along the geodesic path independent of time variations. in other words, the model allows for small retracements along the geodesic but overall motion is harmonic in nature and in order.
there are no set rules on how long the index stays in a season, but once it's established a new season it must precess to the next ordered season no matter how long it takes. if the S&P 500 model geodesic coordinates had already passed back through it's apex and spent a meaningful amount of time ending a season on the otherside of the geodesic and was retracing back the other way, then yeah i'd say we're bound to see significant upside movement in the S&P 500 index.
so, until the geodesic coordinates trace the path to the other side there will inevitably be from this point more down motion in the S&P 500 index than up for quite some time.
| | |
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
another daily unchanged performance for the S&P 500 index. my 2 primary indicators for market direction changes are still bearish on the index. the first indicator is the chart below: the blue line is still on top of the x-axis since the last crossover on june 16, 2009. but as you see the slopes of the two curves are pointed toward each other and not too far from the x-axis anyway. the second indicator is a plot comparison between the RSI of SDS & SSO. see below: 
RSI of SDS is greater than RSI for SSO, hence bearish. if the top most chart signals a market direction change, the RSI chart above will confirm that signal usually within a trading day or 2 by flipping RSIs. however, signals from using RSI tends to be a bit noisy (multiple signals in a short period of time). that's why i use this data as a backup to the time series plot of the geodesic parameters.
there's yet a few other indicators the sell-off may be taking a breather - 2 chart indicators from the previous version of the model. these indicators tend to be a bit more forward indicating, hence more prone to false signals. see below: this chart was a type of approximation of the behavior for the geodesic before the geodesic was established. when the green line crossed over the x-axis, the approximation signaled a market direction change. it has done so as of today. note that the crossover points in time closely match the coincident crossovers of the geodesic parameters. the approximation above was obtained using principals of machine control theory and tuned to match characteristics of the behavior of the S&P 500 index. the tweaking process to get these results was very arduous and empirical in nature. same with the chart below: another chart from the previous model. when the slope of the green line turned 0, the model indicated a market direction change. the slope of the curve is starting to pull up (positive). since the geodesic is fundamental to the behavior of a "neutrally" weighted pairs trade for SDS & SSO, all signals will be issued using the outcome of that data. the old indicators are still included in the Excel spreadsheet analysis for reference, however. the bottom line is be cautious and keep a far amount of cash on the sidelines. if the index kind of wiggles around it's current position, ultra aggressive hedging one way or the other could result in unexpected losses from chasing noisy signals. | | |
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 closed down but way off it's lows. the market rallied in the last 2 hrs of the trading day. as i am writing this, the index is poised to open higher perhaps on earnings news.
despite the small reversal yesterday and possible rally today, the model is still indicating a bearish tone in the S&P 500. however, i'll be watching the geodesic parameters 1st order time rates of change for the possibility of a more sustained rally.
| | |
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
