ETF Prophet

April marked the 6th month in a row that SPX has managed a positive close.  I have seen many analysts suggest this means the market is overextended and due to correct in the coming months.  So I decided to take a look for myself.  I ran…

Most asset return processes can be characterized as containing a primary trend, along with mean-reversion around that trend, as well as a certain amount of random noise.  Econometricians classify these elements using a Hurst Exponent as either : 1)black noise (trending/positive autocorrelations- Hurst>.5) 2) pink noise (mean-reverting/negative autocorrelations- Hurst<.5) or 3)  white noise ( no trend/mean-reversion, low/insignificant autocorrelations- Hurst=.5). [...]

Recent price behavior illustrates how traders should not equate volatility and absolute mean reversion. Over two weeks of choppy up and down has represented next-day reversion perfectly, sending our chop versus trend indicator to extremes. However, ranked volatility (percent ranked HV-100) is likewise at annual lows. Indeed, the last two years have contrastingly provided several [...]

The following graphic is borrowed from a static risk parity approach via Salient Capital Advisors: http://www.theriskparityindex.com/static/pdfs/Salient-Risk-Parity-Index-White-Paper.pdf.  The visual is useful for readers to understand the nuances and relative merits of a Cluster Risk Parity (CRP) approach. In their approach the individual assets and clusters are defined in advance, and thus there is no dynamic clustering method used. However, the [...]

Today’s news centers on the VIX rising above 20 for the first time since July 23.  This is a weekly chart with a few of my favorite technical indicators.  For active traders the 2 SMA8 lines on the chart are of the high and the low…creating a support resistance channel that is amazingly reliable fro [...]

Thursday’s close marked the beginning of the next seasonally strong period.  The study below is the “Twas 3 Nights Before Christmas” study, and I have shown it each year on the blog.  Results are updated.

The stats all appear qui…

  I haven’t posted to the Prophet for a while as most of my efforts have been focused on the Mosaic site.  FYI..here’s an update to the T2 model that just invests in the top 2 momentum ranked ETFs from a basket of 11 sector ETFs.  We use an RSQ (linear regression) stop to further [...]

This graphic is designed to help readers understand the logic and assumptions embedded in the Permanent Portfolio model by Harry Browne. It is also a useful framework for understanding how to construct  regime-based portfolios. The results are re-published from an earlier article written by Corey Rittenhouse at Catallactic Analysis: http://catallacticanalysis.com/permanent-portfolio/. It was a very good post [...]

The chart below demonstrates how Ranked Historic Volatility (volatility compared to past levels) has continued to fall even as price finds itself at two-week lows. Hardly a panic sell even as the change in intermediate trend has become increasingly clear, as first broadcast by large-cap technology…

It was a weak end to an otherwise strong month, leaving the S&P 500 (SPY) down by -1.3% on the week,  but nearly +3.0% higher for the month of September.  Emerging Markets (EEM) logged a particularly impressive monthly performance.  Meanwhile, it’s certainly odd to see Value (PWV) and Healthcare (XLV) styles/ sectors sharing ten-month relative strength [...]

Just a quick look at what’s going on over on the Mosaic SITUATIONS.  We track the major sectors ETFs  of the market each day and rank their relative strength and momentum to derive short term trading opportunities while simultaneously building an equity curve of the top 2 or top 3 daily ranked ETFs. The colorized [...]

It was a bit of a bumpy post-FOMC/ expiry week, ultimately leaving the S&P 500 (SPY) slightly lower by -0.4%. Select sector indices and asset classes were significantly less fortunate; you may wish to scan the list. It will be interesting to see how the end-of-month trade fares going into October. Meanwhile, here is to [...]

Last night in the Quantifiable Edges Subscriber Letter I examined short-term implications of strong 1-day rises in the Russell 2000 (RUT) while the S&P 500 (SPX) declined. I found that there appeared to be a decent upside inclination for the follo…

Tuesday marked the 2nd day in a row where the QQQ made a lower low and a higher high.  Days that do this are often referred to as “outside days” because they trade outside the range of the previous day.  When QQQ has posted back to back …

It looked like there might be a break out to the upside today but volume never picked up and the stalwarts refused to yield more than a modest gain.  There are winners within this market malaise, which can be detected by looking at a ranking of relative strength and momentum among the the various market [...]

Last week’s “European Confidence Boost”/ Drahgi commentary plus a slight U.S. GDP beat and other factors supported a powerful two-day rally, leaving the S&P 500 (SPY) higher by a full +2.7% on the week to the top of its recent trend-channel. While our short-term oscillators have quickly moved into a broad overbought composition, with such [...]

In spite of renewed worries over Spain by Friday, the S&P 500 (SPY) managed yet another higher close of about +0.8% on the week.  While there is a great deal to be legitimately concerned about across the globe, for now markets continue to climb the proverbial wall-of-worry.  On balance the major equity indices are technically [...]