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.

Our timing tools have shown benefits across a wide variety of assets.

TO SUBSCRIBE, please contact kreuser@riskontroller.com or robert@bifrostquestcapital.com.  For ongoing developments, please fill in the sign-up boxes above. 

ECO Bubble Predictions

• Gold – Gold was up last week as bonds advanced; it’s often the case that the precious metal is a safe haven when risky assets do badly or when bonds rise but underperforms when volatility subsides; ECO metrics show gold staying in a (potential) crash state; return no crash goes negative — maintain buy.
• JETS ETF – The airline ETF was up big for a third week; ECO metrics show JETS staying in a crash state; both return no crash and expected return rise — maintain buy.
• Oil – WTI Crude posted a sizable gain for the week and continues its seesaw pattern; moves to a crash state; both return no crash and expected return stay negative — maintain hold.
• USLargeCapGrowth – The style index fell for the week and underperformed the market; stays in rally mode; return no crash goes negative — downgrade to sell.
• USSmallCapValue – Up big for a third week in the risk-on equity market environment and handily outperformed the small cap universe; bubble type moves to crash mode; both return no crash and expected return move down — maintain buy.
• RealEstate ETF – The Real Estate ETF moved up over the trailing week and beat the more growthy equity market indices; stays in rally state; both return no crash and expected return move down — maintain buy.
• TSLA — Stock was up in the latest week; stays in crash state; return no crash drops but expected return jumps — upgrade to buy.
• USUnvGradeBond — Records another decent gain for the week as bonds continue to hold their own; stays in neutral state; both return no crash and expected return move down — maintain hold.
• Technology ETF – Down for the week and underperforms its large cap growth cohort and dramatically underperforms the market; tech still well ahead of the market YTD; moves to a rally mode; return no crash goes negative — downgrade to sell.
• HealthCare ETF – Rose sharply in the latest  week on continued recovery in the sector; stays in rally state; both return no crash and expected return go positive — upgrade to buy.
• Bitcoin – The cryptocurrency recorded a marginal loss in the latest week but its positive momentum continues; stays in rally status; return no crash goes positive — upgrade to buy.

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

“WEBSITE AND THE INFORMATION CONTAINED HEREIN IS NOT INTENDED TO BE A SOURCE OF ADVICE OR CREDIT ANALYSIS WITH RESPECT TO THE MATERIAL PRESENTED, AND THE INFORMATION AND/OR DOCUMENTS CONTAINED IN THIS WEBSITE DO NOT CONSTITUTE INVESTMENT ADVICE.” 

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