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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 – Gold fell in the past week but YTD gains are still up over 10%; ECO metrics show gold staying in a crash state; little change in metrics — maintain buy.
  • JETS ETF – Airline ETF was down in the past week and it underperformed the broader stock market; ECO metrics show JETS staying in crash state; return no correction and expected return slide — maintain buy.
  • Oil – Down for a third week; expected return and return no correction both rise — maintain sell.
  • USLargeCapGrowth – Jumps up in the past week and beats the broader stock market; trounces value stocks; stays in crash mode; expected return and return no correction both rise — maintain buy.
  • USSmallCapValue – Posts a big drop for the week and underperforms the broader market; return no correction drops but stays positive — maintain buy.
  • RealEstate ETF – Flat for the prior week; stays in crash state; return no correction drops but stays positive — downgrade to hold.
  • TSLA – Stock moves down for the week; YTD underperformance persists; stays in rally state; little change in metrics — maintain sell.
  • USUnvGradeBond — Moves up for the week; expected return and return no correction both improve — maintain buy.
  • Technology ETF – Surges up for the week and beats the broader market; performs in line with its large growth style cohort; expected return and return no correction both rise — maintain buy.
  • HealthCare ETF – Rises for the week and outperforms the broader market; maintains crash state; return no correction and expected return both move up — upgrade to buy.
  • Bitcoin – Records a sizable gain for the week along with other risk-on assets; maintains crash state; return no correction and expected return slip — 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.


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.