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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 surged again in the past week bringing YTD gains to nearly 16%; ECO metrics show gold staying in a crash state; little change in metrics — maintain buy.
  • JETS ETF – Airline ETF was up in the past week and beats the broader stock market; stays in crash state; little change in metrics — maintain buy.
  • Oil – Records a gain for the week; return no crash rises but expected return and falls — upgrade to hold.
  • USLargeCapGrowth – Rises in the past week and beats the broader stock market; outperforms value stocks; stays in crash mode; expected return and return no correction improve — maintain buy.
  • USSmallCapValue – Decent move up for the week and performs in line with large cap stocks; little change in metrics — maintain buy.
  • RealEstate ETF – Big gainer and moves up for a fourth week as interest sensitive sectors recover; stays in crash state; expected return and return no correction improve — upgrade to buy.
  • TSLA – Stock price swings continue as extreme volatility persists and jumps up for the week; YTD underperformance persists; stays in rally state; return no correction improves — maintain sell.
  • USUnvGradeBond — Up for the week; expected return and return no correction mixed — maintain buy.
  • Technology ETF – Surges up for the week and beats both the broader market and its large growth style cohort; return no correction and expected return stay move up — maintain buy.
  • HealthCare ETF – Records a hefty gain for the week beating the broader market; maintains crash state; expected return and return no correction move up — maintain buy.
  • Bitcoin – Jumps up after six weeks of losses as risk-on environment helps virtual currencies; maintains crash state; expected return and return no correction move up — 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.