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Andrei Sota
3.3K posts
Andrei Sota
@Signal_Sigma
Invest Smarter with Signal Sigma: Professional-grade strategies, automated insights, and risk tools. Try free at https://t.co/Ng2smTsc6F No card required.
Bucharest, Romania Katılım Ocak 2013
262 Takip Edilen5.4K Takipçiler
While true, I would argue that "demand destruction" really occurs when $XLE is highly correlated with $SPY and $SPY is in a downtrend.
Otherwise, the market seems to be doing well in low correlation regimes.
That being said, the recent reading IS striking.
Lance Roberts@LanceRoberts
The three-month correlation between energy and the S&P 500 has reached its most negative level on record. Typically, the demand destruction from high oil prices eventually catches up with earnings and expectations. The question is whether this time is different?
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@astro_idx If this model provides consistent negative returns in live trading (out of sample data), I will publish it as part of the oficial models.
Until then, it's in the experimental stage.
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I've been working on this model that provides a suitable portfolio for taking short positions, as it tends to underperform consistently in the backtest.
It rotates positions weekly, based on mean-reversion. As you can see, being short this portfolio would pay off longer term.
However, it's going to bite you in short squeeze periods like mid-March to present, where it gained +35%.
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Current Uninterrupted Rally for major factors versus maximum rallies in the past 5 years.
Emerging Markets $EEM have nearly run their course.
But Mega Caps, Momentum, Growth - the areas of the market most analysts are jittery about - are only about halfway through.
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Starting major improvements and optimizations to app responsiveness and query speed today.
First fix - time frame selector in the Performance tab of Strategies.
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... the options market is showing that $MTUM has the best risk / reward setup out of all major factor ETFs.
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Drawdown in Momentum Factor stocks is already well past the average loss of the past 2 years in just 3 trading sessions.
Profit taking was inevitable. Probably some more pain to come, but surprisingly .../
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Whenever such a deviation has been recorded, the outcome for $QQQ has been 100% positive both after 6 and 12 Months intervals.
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Same story for $QQQ outperformance versus $SPY (measured as Z-Score deviation on the subgraph).
Rarely has this been recorded at more than +2 Standard Deviations in the last 16 years.
Yet the outcome for either $QQQ or $SPY is not as bearish as one would be inclined to believe.
Andrei Sota@Signal_Sigma
Tech $XLK has outperformed $SPY by 18% on a 3-Month rolling window. That's the highest value recorded this decade and way above anything deemed "normal". This setup appears to have a single logical outcome: disaster for the long Tech trade in one messy and violent unwind. Our reptilian brain sees this and says something along the lines of "line goes up - now line must go down". But is that what history really tells us? /...
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In other words, our study reveals that profit taking and a more cautious tape tend to provoke rotations and consolidation out of Tech itself (while the general market outperforms), but the longer term outcome is bullish both for Tech and the broader market.
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So what happens to $XLK when the same signal is active?
We get weaker return patterns up to the 1-month mark (sub 70% win rates), but median returns start meaningfully diverging after 3-months and more.
3-Month win rates sit at 83%, with ALL 6-Months signals resolved to the upside with +12% median returns.
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Tech $XLK has outperformed $SPY by 18% on a 3-Month rolling window. That's the highest value recorded this decade and way above anything deemed "normal".
This setup appears to have a single logical outcome: disaster for the long Tech trade in one messy and violent unwind.
Our reptilian brain sees this and says something along the lines of "line goes up - now line must go down". But is that what history really tells us? /...
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@BergMilton And zooming in on the present situation. In my opinion, that 2% doesn't seem so small anymore.
In any case, cool experiment! Though not necessarily predictive.
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@Signal_Sigma 2% Does not seem very extreme. Now we must compare the current data to that at the market peaks in 1972, 1987, 200, 2008 and 2020.
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Great question @BergMilton
I'll answer that for you. as of yesterday, these 20 S&P 500 stocks were at 52-wk lows, totalling $1.4T in combined market cap.
Out of around $68T in total. So that's 2% of the index (in terms of market cap) at 52-week lows.
Milton W Berg CFA@BergMilton
Jason. It would be helpful if you display this in terms of market cap rather than in nominal terms. What percentage of the Sp500 market cap are at new lows compared to historical data.
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@BergMilton Zooming in on 2020. There was virtually no such signal back then, as most stocks were *not* at 52-wk lows prior to the crash.
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@BergMilton Well, I can help with the data from 2016, though you really have to squint to see it.
On the lower histogram you can see the part of the market cap actually hitting the 52-week low (in orange).
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Agree. Sentiment is just not where we typically see it in euphoria phases.
The market loves to climb a wall of worry and there's plenty of stuff to be concerned about.
ISABELNET@ISABELNET_SA
🇺🇸 S&P 500 This is still a bull market to love, even as the bears are making more noise. May peaks are rare and June has never marked the top for the S&P 500. With new highs within reach, the rally may have further to run 👉 isabelnet.com/?s=S%26P+500 h/t @RyanDetrick $spx #spx
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@BergMilton Hmm, interesting point. I've never seen it expressed that way before. I don't think I have the data to recreate it but will check.
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Jason. It would be helpful if you display this in terms of market cap rather than in nominal terms. What percentage of the Sp500 market cap are at new lows compared to historical data.
Jason Goepfert@jasongoepfert
So, again, this is just shouting into a void. But this is the most new lows within the S&P 500 $SPY on a day the index poked above a prior all-time closing high. Ever. Like EVER, ever.
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The current rally is narrow - that's certainly true.
A breadth measure such as the number of stocks trading in topping patterns has indeed increased since the mid-April lows.
However, we are far and away from triggering a sell signal here. Breadth can also broaden and catch up with major market indices.
Jason Goepfert@jasongoepfert
So, again, this is just shouting into a void. But this is the most new lows within the S&P 500 $SPY on a day the index poked above a prior all-time closing high. Ever. Like EVER, ever.
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