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.

Where do you invest?  Our timing tools can be beneficial to you across a wide variety of assets.

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ECO Bubble Predictions

• Gold – Displays some down-side protection for once in risk-off markets this past week; little change in metrics — maintain sell.
• JETS ETF – Pushed down again in the past week as global recession fears rise; expected return and return no correction improve — maintain sell.
• Oil – Ekes out a gain in the past week; expected return and return no correction improve — maintain sell.
• USLargeCapGrowth – Down big again in the past week in line with the broader market; still in rally mode; expected return and return no correction improve — maintain sell.
• USSmallCapValue – Moves down along with other equities but loses less than its growth counterpart; expected return and return no correction improve — maintain sell.
• RealEstate ETF – One of the biggest losers for the week among the sectors; maintains rally state; expected return and return no correction improve — maintain sell.
• TSLA – Down in line with the market in the past week; expected return and return no correction rise further — maintain buy.
• USUnvGradeBond — Down big for the week; rally state steady; expected return and return no correction slip — maintain sell.
• Technology ETF – Beaten down for the week and even more than its growth brethren; rally state steady; little change in metrics — maintain sell.
• HealthCare ETF – Outperforms the equity market but still down for the week; maintains rally state; expected return and return no correction go positive — upgrade to buy.
• Bitcoin – A small gain for the week as positive correlation with equity assets disrupted; stays in rally state; expected return and return no correction go positive — upgrade to buy.

The simulated performance of this list is tracked here.  For more details see ECO Explanatory Notes

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