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
despite the late day small bear raid, the S&P 500 index continues to demonstrate there is an unusual amount of interest on the sidelines in buying equities. funds & fund managers who haven't gotten back into the market since the march-2009 lows are starting to feel heat for not participating. how long this will last is anyones guess. based on model parameters, the index looks like it ready to unleash a buch of pent up demand.
having said that, traders must maintain caution and it's still prudent to maintain a descent reserve of cash. for our purposes i still submit that 30% cash is safe and aggressive enough for aggressive model users. the market as a whole has to clear the Q2 GDP hurdle at 08:30 EST. if the report does not show that the rate of economic contraction has not significantly slowed or better stopped contracting altogether, the market is likely to take a dive. if the report is favorable, look for continued momentum to the upside for several weeks.
the market is still not trading on financial business fundamentals. earnings are in the tank and revenues are more scarce. however at this point it's all about the perception that the economy is poised for a recovery not too far in the future. so it appears the market is trading on hopes and dreams. it is what it is. that's why it's prudent to have a hedge on and cash ready to be deployed. patience is the key. trying to get ahead of the market could put you in a perilous predicament. the best strategy with this system is to be conservative and let the market decide who wins.
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| Dear Blogger,
money flow going into the S&P 500 has picked up considerably over the last week or so. even when the index had leveled off a few days here, money flow still increased.
what i believe we are seeing today is pent up demand to buy equities busting through their restraints. a lot of money not previously in market is now pouring in and pushing the index much higher.
expect this rage of money flow into the S&P 500 for several weeks with a few breathers like we had this week. i don't believe the economy is this much better, so anticipate there will be a reversal later in the year. for now, enjoy the ride.
pairs traders with conservative dispositions can still be rewarded. as i have been indicating in my updates, a 50:50 trade put on even today will still increase in value as long as SSO RSI is greater than SDS which it is at this moment. if not i will do my best to send out a timeley alert.
let the pair self adjust and drift upward. when your comfortable add a little more to SSO as frequently as freasible for trade cost considerations. you too will enjoy the ride up. keep a close eye on trade update commentarys and the data published in the spreadsheet.
cheers!
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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
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.
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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
as subscribers will see, just about every metric & parameter i keep track of in the model has maxed out or is about to max out. from an EOD perspective, it looks like the S&P 500 index is taking a breather from the now storied meteoric rise of 2009. one of the only clues we have we are taking a slight breather is a flattening off of the index & an ever so slightly dip in the price in SSO. another new metric i've introduced is a measure of relative velocity between the rates of change of the 2 geodesic parameters, diif-c & diff-theta. levels in relative velocity is just below, magnitude-wise, the low of the october crash of 2008. here are some chants. the chart below is the comparison of the RSI of SDS & SSO. you can see the peaks, top & bottom, have curlled in some. the next chart is the new measure of relative velocity changes of diff-c & diff-theta. the last time the value of this metric was extended this far was during the october-november crash of 2008. one must ask, how far can this rally go? the only obvious answer is as far as it wants to. markets are not bound by measures as much as they are bound by sentiment. measures only say what sentiment was yesterday. to be on the conservative side with this hedge or trade, set you're pairs trade as close to 50:50 as possible and just let it drift from there a while. typiclally the value of the portfolio will be biased to whichever ETF has the highest RSI for a given day. while doing this you won't have to worry for a few days about being right or wrong with this hedge. but the trades are there already if the market decides to blast off again or rapidly change directions. stay cool and please have some cash on the sidelines. | | |
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 index waffled all over, albeit a relatively small range, to end up positive 0.3% for the day. there a cool-down may be on the near-term horizon. diff-theta & diff-c appear to be leveling off as well as the amplitude of vector-c. but don't under-estimate this market to move upward with incredible momentum. please make sure to ready the commentary for July 24, 2009. it would not hurt to go 50:50 for a few days while the market sorts itself out. currently SSO has higher RSI and changes throughout the day.
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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.
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