Weekly roundup #13

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.

Another update to the model, resulting in another 5% improvement in the prediction of the return. I also split the momentum indicator into two parts, a trading part that optimizes between 5 and 30 days, and a trend part that optimizes between 63 and 126 days. The first subplot now shows the momentum indicator as a color code for the price index. Green is bullish and red is bearish.

Another addition is the forward return model for two more time frames, the 5-day forward return and the 10-day forward return. In the upper left corner you can see the r-square for the validity of the model.

The overview table have an error, i will add them tomorrow once i updated the model !

Index overview

We see most indices in an uptrend, but without supporting quantile prints (forward returns). The only index that shows an uptrend, favorable quantile prints, and thus high strength is BFX. It shows the most strength and is probably the best trading position. In the charts below you can see the different forward returns for 5, 10 and 15 days in terms of quantiles and their mean forward return. On the short side, the Russian index looks good with several quantile 1 prints, but overall nothing spectacular on the short side. A quantile-1 print was confirmed in all three time frames, which increases the probability of a correction (see chart below). The 90 confidence intervals should show some perspective of a "likely" range with its outliers, the mean of the confidence intervals, i.e., the forward return for quantile 1 is the most likely outcome for the index.

LONG:

New: 3 different time frames for the forward return model

SHORTS:

Last weeks return (5 days:)

Long:

1. VIX +2,79%

2. BVSP +2,53%

Short:

1. BTC -1,56%

Yearly coupon:

monthly coupon: