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Signals and Commentary for SP500 01/06/2011

Jan. 06, 2011 7:28 AM ETSPY, QQQ, GLD, FAZ, FAS, SH, VIXY, VXX
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chart  green : uptrend high confidence | yellow : uptrend low confidence

Statistical Learning Models :


Neural Net Daily Trend Identifier : UP [0.96 confidence : High ]

Daily Short-Term Overreaction : DOWN [confidence : Low]



Filtering Model (4-hour frequency):


Main Trend : UP

Momentum : UP [decreasing]



Mean Reversion (4-trading hours frequency) :


4 periods accumulated return (16 hours)  : 0.1%

percentile :  44%



9 periods Return (36 hours)  : 1.35%

percentile :  68.0%


Volatility :


10 period Volatility (40 hours) : 7.8% annualized

percentile :  22%


Relative Volatility (10 per / 50 per)

percentile : 65%


Markov Regime Switching identifier ( daily close ):


Probability of a strong uptrend regime : 2.8

Probability of a  weak uptrend regime : 41.8

Probability of a sideways / weak uptrend regime : 48

Probability of a downtrend / volatile regime : 7.4


SPY - VIX statistical relationship ( daily close ):


zone : uptrend

percentile : 52.0% [ normal ]


Wavelet Discontinuity Watch (daily close ) :


Risk of crash is low but starting to increase.


Higher frequencies starting to increase. Trend change pattern emerging.


Overall commentary for Jan/06:


Neuralnet trend model climbed to high confidence zone.

Main trend still up, with slightly decreasing momentum.

Overall volatility is low but rising. Usually this signals short-term trend changes.

MatLab´s Markov model updated the regime probabilities, embedding more uncertainty by doubling the odds of extreme regimes (strong uptrend from 1.4% to 2.8%  and downtrend from 4% to 7.4%


Wavelet model probability of a discontinuity is still low but increasing.

The wavelet pattern currently emerging leads to a correction or a crash.


Model suggested positioning is small short with tight stop if SPY gaps on opening.

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