Mike
05-03-2015, 03:06 PM
Watch list have been updated.
The damage done to the market last week took the Market School exposure count down to +1 (30% invested).
We have been experimenting with follow through days using the Market School exposure model. Two of us on this forum ran an optimization study that set the follow through threshold based on volatility of the NASDAQ in a 200-day look back window. Volatility in this sense selects the days that closed up in the 200-day window and calculates the average percent up of the up days.
We theorized that an optimized FTD Threshold could be found where: Threshold = A* Volatility^m.
20,000 model runs later we found a promising solution where A=1.11 and m = 0.68. These values produce a modeled NASDAQ portfolio gain greater than the baseline Market School model. So the next time you are wondering if we are getting a FTD, take out your excel spread sheet and calculate Volatility and plug the numbers into the formula.
Now running the new Market Exposure model with the revised FTD thresholds also produced a +1 exposure count for Friday's close. Exposures of +1 really tell us that the market isn't trending well. It is really clear that earnings has taken a toll on social media and some biotech's. I was able to exit GRUB with a small profit before it cratered. Luckily I was not in HAR, I avoided buying close to its earnings report. I took a small profit in FB also before it decided to fail the 50-day.
I have to admit that I am clueless whether the market is going to do what it has been doing for such a long time: go back to new highs after each time getting mired in quicksand. We have arrived in May however and the news coming out of the various ministries of truth is weakening. This has probably has a lot to do with the strengthened dollar than anything else so monitor the dollar going forward. If it resumes the uptrend our bull market could be over. It has pulled back some, so we wait and see. Of course the FED is watching also and if weakness continues they might revive QE. A 27-week simple moving average of the NASDAQ seems to qualify as a magic line. I won't get serious about thinking we have a failed market until this line is decisively broken.
The damage done to the market last week took the Market School exposure count down to +1 (30% invested).
We have been experimenting with follow through days using the Market School exposure model. Two of us on this forum ran an optimization study that set the follow through threshold based on volatility of the NASDAQ in a 200-day look back window. Volatility in this sense selects the days that closed up in the 200-day window and calculates the average percent up of the up days.
We theorized that an optimized FTD Threshold could be found where: Threshold = A* Volatility^m.
20,000 model runs later we found a promising solution where A=1.11 and m = 0.68. These values produce a modeled NASDAQ portfolio gain greater than the baseline Market School model. So the next time you are wondering if we are getting a FTD, take out your excel spread sheet and calculate Volatility and plug the numbers into the formula.
Now running the new Market Exposure model with the revised FTD thresholds also produced a +1 exposure count for Friday's close. Exposures of +1 really tell us that the market isn't trending well. It is really clear that earnings has taken a toll on social media and some biotech's. I was able to exit GRUB with a small profit before it cratered. Luckily I was not in HAR, I avoided buying close to its earnings report. I took a small profit in FB also before it decided to fail the 50-day.
I have to admit that I am clueless whether the market is going to do what it has been doing for such a long time: go back to new highs after each time getting mired in quicksand. We have arrived in May however and the news coming out of the various ministries of truth is weakening. This has probably has a lot to do with the strengthened dollar than anything else so monitor the dollar going forward. If it resumes the uptrend our bull market could be over. It has pulled back some, so we wait and see. Of course the FED is watching also and if weakness continues they might revive QE. A 27-week simple moving average of the NASDAQ seems to qualify as a magic line. I won't get serious about thinking we have a failed market until this line is decisively broken.