Weekly roundup #12

Forward Return Analysis & macro data roundup

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This is a new weekly series where you will get a number of indices and ETFs analyzed using the "Recognizing Market Chaos" framework. I will highlight the best opportunities based on the overviews and include the image in the blog post. This is the first post for the new theme, so I need a little more time to adjust the content and find the right way to deliver the most value.

For an introduction, see the posts on recognizing chaos in the market.

I made some other changes and improvements to the model. I added a likely estimate of upside momentum in forward returns (gray line). This is another layer to assess whether the forward returns structure is supported by all possible estimates. Then I added a volatility analysis to the model, shown in another image. This feature added another 3-8% of validity to the model (depending on the asset). Also the overview now contains a signal strength column, which shows the relationship of the bullish probability and quantile prints ranging from 0 to 4, where 4 is the highest signal strength.

Index overview

Most indices are back in an uptrend, with some exceptions like BUK100 or FTSE. Remember that the trend column shows the time frame adjusted midpoint of a Donchian channel optimized for each asset. Therefore, it acts as a volatility-adjusted momentum signal.

In terms of quantile expressions, the U.S. indices are in a mean-reversion quantile 3 with an expected return of about 0, depending on the index. On the short side, IMOEX and BTC are the only two assets that have a decent overbought signal with multiple quantile 1 expressions. Future returns should not look good for these two assets and a correction is very likely.

On the long side, we see BUK100 with a decent quantile print but a bearish trend. More useful long positions are therefore the VIX with a decent quantile pressure and a high bullish probability. The same is true for the Brazilian index BVSP, which should also have a positive 15-day forward return.

LONG:

SHORTS:

Last weeks return (5 days:)

Long:

1. VIX +1,2%

2. BVSP -0,83%

Short:

1. BTC -1,46%

Yearly coupon:

monthly coupon: