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Signals and Commentary for SP500 01/07/2011

|Includes: FAS, FAZ, GLD, QQQ, SH, SPDR S&P 500 Trust ETF (SPY), VIXY, VXX

 

chart   green : uptrend high confidence | yellow : uptrend low confidence

 

Statistical Learning Models :

 

Neural Net Daily Trend Identifier : UP [0.95 confidence : High ]

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

 

 

Filtering Model (4-hour frequency):

 

Main Trend : UP

Momentum : UP [increasing]

 

 

Mean Reversion (4-trading hours frequency) :

 

4 periods accumulated return (16 hours)  : 0.6%

percentile :  59%

 

 

9 periods Return (36 hours)  : 1.3%

percentile :  68.0%

 

Volatility :

 

10 period Volatility (40 hours) : 7.8% annualized

percentile :  22%

 

Relative Volatility (10 per / 50 per)

percentile : 69%

 

Markov Regime Switching identifier ( daily close ):

 

Probability of a strong uptrend regime : 2.7

Probability of a  weak uptrend regime : 34.6

Probability of a sideways / weak uptrend regime : 52.6

Probability of a downtrend / volatile regime : 10.4

 

SPY - VIX statistical relationship ( daily close ):

 

zone : uptrend

percentile : 41.5% [ 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/07:

 

Neuralnet trend model still in high confidence uptrend zone.

Main trend up, with increasing momentum.

Overall volatility is historically low but rising. Relative volatility is rising, usually this signals short-term trend changes.

MatLab´s Markov model updated the regime probabilities, downtrend regime went from 7.4% to 10.4%. If it keeps rising chances are good we are entering at least in a short term correction.

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

The wavelet pattern currently emerging leads to a correction or a crash, but still  no signal yet.

Model suggested positioning is small short with stops on SPY highs around 127.8.

Good trading.
 

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