A Quantum Leap in Financial Market Analytics

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  • 10 May 2020 7:43 PM | (Administrator)

    Subscribers in the Inner Circle were alerted to buy signals in Tesla (TSLA), Dexcom (DXCM) and Zoom (ZM) last Sunday for purchase at the open on Monday May 4th.  Subscribers that entered that trade finished the week up over 15% as TSLA rose 16.9%, ZM added 10.4%, and Dexcom (a recent entrant to the Nasdaq 100) surged 18.2%.  Congratulations to all those subscribers able to bank that profit.  The current week's rankings our now available in the Inner Circle.

  • 21 April 2020 3:21 PM | (Administrator)

    With the market down a second day in a row, and the absolute carnage in the crude oil market, we thought now would be a good time to re-visit some of the analogs to the current market that we've discussed in the Inner Circle.

    Given the speed and depth of the latest crash, highest correlated analog was Black Friday and Black Monday of October 1987.  The conditions triggering the crash then were certainly different than those now, however the basic human emotions of fear and panic are the same.

    Should this correlation with 1987, the retest of the bottom from March 23rd should occur on or around April 28th. 

    Another highly correlated market was the winter of 1973 into early 1974.  Ironically that market crash also revolved around oil.  However in that case, OPEC proclaimed an oil embargo targeting western nations that pushed the price of oil up nearly 400%.

    Again, we look at market analogs to give us an idea of what to expect in the future--however we don't trade on these signals.  For actual trading we use our proprietary trading model that we've backtested over the several market environments since 1996--from the exuberance of the era to the fear and panic following the September 11th attacks.  Our purpose is to provide an investment model that allows the greatest return while keeping risk to an absolute minimum. 

  • 19 April 2020 12:54 PM | (Administrator)

    Since the recent market low on March 23rd, we wanted to see was there solid support behind the move.  So we turned to our analysis software and wrote up the code to run the test.  Even we were surprised to see the result.  In the current market rebound, 86 of the 103 stocks currently in the Nasdaq 100 were within 10% of near-term highs.  That is a lot of strength!  As we've noted before, the reality that the other indexes aren't participating in the rebound nearly as much makes us concerned of the health of the overall market.  However, it may be that similar to the area, the Nasdaq tech index WAS the market.  Here's the graphical result of our study.

  • 12 April 2020 9:42 PM | (Administrator)

    We still rely on our main tried-and-true and robustly back-tested MIS indicators for our actual trading, but I also like to try my hand at forecasting the market--and for that I like to look at cycle forecasts.  While I don't believe 100% in market cycles, my personal experience with cycles such as full moons and their effects on human behavior leads me to believe that their may be some value with regards to market forecasting.  With that being said, let's look at our latest chart of the S&P 500.  In the short term, this cycle forecast appears to catch the turns in the market fairly well.  The latest forecast predicts the market will remain in an overall uptrend until about the first week of May.  We'll see...

  • 10 April 2020 4:18 PM | (Administrator)

    Situations occurring in the present that drive the basic emotions of fear and greed are unlikely to have occurred in the past, but the emotions, and how we allocate money during those time periods are often similar---and therefore quantifiable.  

    The good news out of New York today in its fight against the coronavirus, is for the first time, there is a negative number of ICU admissions for the first time since the pandemic started.  HOPEFULLY, this is not a "one-off" event, and that we can begin to see a flattening of the curve and a return to normalcy.

    This weekend, Marketwatch penned an article stating that March's lows will be re-tested and gave a time frame of 137 days, or August 7th, to be exact.  While we don't officially have a position on whether or not the bottom will be re-tested, we do have software that does allow us to see what has occurred subsequent to prior bear markets that had highly-correlated price action with the current one.  

    First let's look at 1987:

    Correlated to the current market, should a retest occur, it will be on or near April 28th.

    Our next example is the Asian Contagion market of 1998--fears of a domino-effect of defaults swept the countries in the Pacific Rim weighing on global financial markets.

    Should a re-test occur, according to this analog it would occur near April 23rd.

    Our final example is the Gulf War of 1990-1991.  Original estimates were that the conflict could evolve into a much large Arab vs. Western world conflict and estimates put American combat deaths at over 50,000.  Given this analog:

    Should a retest occur, it will be around May 4th.  

    Our difference of opinion isn't whether or not a retest will occur, it lies in the fact that our analysis shows that if a retest is going to occur, it should happen by the end of April or the first week of May.  Given the amount of Fed liquidity, and the positive news out of New York today, we are hopefully optimistic that the market can continue its recovery.  More details will be in the Inner Circle this weekend.

  • 06 April 2020 2:16 PM | (Administrator)

    Analyzing price action over the last 125 days (about half a trading year), we found a few examples of trading eerily similar to the current market.  The most highly-correlated with current action was the crash of 1987.  After the steep sell-off in October 1987 (Black October), the market managed a rebound, ultimately to retest its lows in December.  Transposing that on the current market environment, we could see a retest of March's lows in the last week of April.

    Our software also detected another analog--September of 1990.  Those of us old enough to remember the very beginning of the Gulf War remember Iraqi SCUDS raining down on Saudi Arabia and Kuwait, with the threat of a third world war a strong possibiity. 

    Again, we saw a sharp drop, followed by a rebound, and an ultimate test of the earlier lows.

    To be clear, again, we don't trade off of these charts, but we do use them in our "weight of the evidence" approach to market analysis.

  • 05 April 2020 8:54 PM | (Administrator)

    The market is trading eerily similar to October 1987 according to our analysis.  Should the pattern continue, we expect the market to re-test March's lows sometime around the third week of April.  We don't use these projections for actual trading, but we use them as part of our "weight of the evidence" approach to market analysis. - The Leader in Quantitative Analytics

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