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 – Down big in the past week; expected return and return no correction slip — maintain buy.
• JETS ETF – A sizable move up for the week along with other equities; stays in crash state; expected return and return no correction slip — maintain buy.
• Oil – Crushed in the past week as commodities fall out of favor; moves into rally state; expected return and return no correction fall — downgrade to hold.
• USLargeCapGrowth – Considerable gain for the week and a big beat over the broader equity market again; still in rally mode; expected return and return no correction slip — maintain buy.
• USSmallCapValue – Posts a hefty gain for the week outperforming other equity styles; expected return and return no correction rise further — maintain buy.
• RealEstate ETF – Decent gain for the week in line with broader equity market; maintains rally state; expected return and return no correction rise further — maintain buy.
• TSLA – Astonishing comeback continues recouping a big chunk of prior losses; little change in metrics — maintain buy.
• USUnvGradeBond — Eked out a gain in the past week as choppiness persists; rally state steady; expected return and return no correction rise — maintain buy.
• Technology ETF – Up big for the week and outperforms even its large cap growth cohort; stays in rally state; expected return and return no correction slip — maintain buy.
• HealthCare ETF – Moves down for a sixth week and underperforms other equities as safety again gets shunned; stays in rally state; expected return and return no correction slip — maintain hold.
• Bitcoin – Another gain in the past week as risk-on environment helps with recent crypto struggles; stays in rally state; expected return and return no correction jump — 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.