Predictions

Bubbles, crashes, rallies, and corrections

Fundamental, cyclical, and emotional factors influence financial markets and can be observed in market prices. Over various time frames, prices can exhibit non-random behavior such as trending, mean-reversion, or bubbles. These price patterns arise in all global markets and can be exploited profitably given adequate liquidity.

But price patterns are transitory and poorly understood by most discretionary investors. The Efficient Crashes Optimizer (ECO) asset price model identifies signatures in price data indicating potential crashes or rallies and estimates the magnitudes, the probabilities, and the timing of expected moves.

In the examples below, various predictions for several assets are highlighted in the table.  We track the forward-tested results of these predictions by using the ‘hedge’ column to weight each asset return.  Note that some assets can be levered up to 2X.

In addition to the assets shown here, predictions/trading signals can be calculated on a variety of individual or index returns of equities, fixed income, commodities, or currencies over various periodicities.

Wherever one invests, our timing tools have shown benefits across a wide variety of assets.

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ECO Bubble Predictions

• Gold – Gold dropped in the past week after five weeks of gains; ECO metrics show gold staying in a crash state; expected return and return no correction stay positive — maintain buy.
• JETS ETF – Airline ETF was flat in the past week and loses out to the broader stock market; stays in crash state; expected return and return no correction both drop — maintain buy.
• Oil – Records a decent gain for the week; expected return and return no crash improve — maintain sell.
• USLargeCapGrowth – Rises in the past week after four weeks of loses and beats the broader market; outperforms value stocks; stays in crash mode; expected return and return no correction improve — maintain buy.
• USSmallCapValue – Sizable move up for the week but loses to its small cap growth counterpart; little change in metrics — maintain buy.
• RealEstate ETF – Moves up for week as interest sensitive sectors recover; stays in crash state; expected return and return no correction improve — maintain hold.
• TSLA – Extreme volatility persists as TSLA records a huge rebound  for the week; YTD underperformance persists; stays in rally state; expected return and return no correction stay negative — maintain sell.
• USUnvGradeBond — Small gain for the week posted and gets beaten by equities again; little change in metrics — maintain buy.
• Technology ETF – Up for the week, beats the broader market, and performs in line with its large growth style cohort; return no correction and expected return stay positive — maintain buy.
• HealthCare ETF – Records a small gain for the week but loses out to the broader market; maintains crash state; expected return and return no correction move down — maintain buy.
• Bitcoin – Marginal loss for the one week period extending losses to four weeks as virtual currencies exhibit renewed volatility; maintains crash state; expected return goes negative — maintain buy.

The simulated performance of this list is tracked here.  For more details see ECO Overview, Notes, and Details

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To download historical ECO scores or more information, contact kreuser@riskontroller.com.