Bubbles, crashes, rallies, and corrections
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. Using a set of assets of interest in the current market, various predictions from the modelling process are highlighted in the table below.
We track the simulated performance of this list by using the ‘hedge’ column to weight each asset return.
ECO Bubble Predictions
- Gold – Gold was down marginally in the past week and the hedge remains negative. We show gold’s overpricing growing. Maintain sell. Gold has been a short for 9 weeks now.
- JETS ETF – JETS had a great week as it climbed 3% but it’s still exhibiting conflicting signals and while it is expected to crash, its mis-pricing continues to grow showing a potential gain — hold for now.
- Oil – After another big jump in price for the week, oil continues to show middling metrics and actually looks a bit overpriced. Neutral.
- USLargeCapGrowth – Has moved to crash category but signals show a slightly positive expected return and low probability correction size. Maintain buy.
- USSmallCapValue – Underpriced by 18% now, and had a plunge in it’s probability of a correction, but the return no correction is now fairly big — move to buy.
- RealEstate ETF – While in a crash state, there is a decreasing correction size and correction probability mis-pricing continues to be negative — hold.
- TSLA – Up 20% in the past week and clearly a crash candidate as its correction size catapulted, BUT its 76% overpricing has actually dropped a bit — mixed metrics. Hold.
- USUnvGradeBond – Return no correction, expected return, and hedge all go positive. Raise to a buy.
- Technology ETF – The YTD return rocket ship, a.k.a., US tech sector, was down last week and was also beaten again by the broad market index. Metrics are uninspiring in either direction — maintain hold.
- HealthCare ETF – Positive expected return is growing and hedge still at the max — maintain buy.
For more details see ECO Explanatory Notes
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ECO scores are an important input in the AugurMax investment process. A powerful, cutting edge asset allocation engine is created when combining ECO scores with the RisKontroller optimizer.