When CPI falls below zero $SPY

January Barometer revisited -- down Jans and up Febs

Some people tell me that I have “too much time on my hands” because I spend so much time “crunching numbers.” I tell them “That’s ridiculous, I don’t have any time on my hands because I am so busy crunching numbers” (That usually shuts them up. At least for a little while). In any

This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of 38 days-to-expiration (DTE) Iron Condors (IC), with 16 delta short strikes, with different profit and loss exits as a percentage of the initial credit. Recall that these RUT ICs were

To install Systematic Investor Toolbox (SIT) please visit About page. I previously presented a case study of Excel to SIT mapping in the Thinking in SIT post. I want to continue with another example based on following excellent tutorials: Backtesting A Basic ETF Rotation System in Excel Free

With all of our focus on assets - and how much and when to allocate them - are we missing the bigger picture? Our book begins by reviewing the historical performance record of popular assets like stocks, bonds, and cash. We look at the impact inflation has on our money. We then start to examine how

Suppose we have an unstructured block of text. We want to reduce the information contained within the raw words and phrases into a single score of whether it is positive or negative. For example, suppose we have a tweet and we want to determine whether it is bullish, bearish, or neutral. Semantic

In this article I want to discuss one of the most important and tricky issues in machine learning, that of model selection and the bias-variance tradeoff. The latter is one of the most crucial issues in helping us achieve profitable trading strategies based on machine learning techniques. Model

One of the primary goals of Scott’s Investments is to educate individual investors by creating and tracking relevant investment strategies. Some of the strategies are my own, while others like the Ivy Portfolio are inspired by others. This week I added a new portfolio spreadsheet to my site, the

In the lead up to the release of our first book, Intro to Social Data for Traders, we have been highlighting the ways that social data and stock prices are related. But what is social data, exactly? Social data is term which encompasses multiple sources of information such as search queries, social

As many are aware, economists aren't the funniest group in the crowd. Here are some sample jokes from the funniest economists out there--Yoram Bauman. Here is a sample economist joke: When Yorum told his dad that he wanted to use his Ph.D. in economics as the basis for a comedy career, his dad

Bullish price momentum globally

In this post we will look at the backtest results for dynamic exits of 38 days-to-expiration (DTE) Iron Condors (IC), with 16 delta short strikes, with different profit and loss exits. For some background on how these results are presented, please review the overview and prior 38 DTE posts at: RUT

Bullish price momentum in broad US market

I used to always cut my round fruits and vegies in the wrong directions. I finally got around this problem by turning them in the opposite direction to the way I initially wanted to cut them. Similarly, many investors and investment managers are making investment decisions the wrong way and need to

Towards the end of last year I wrote a post (see here) about the advent of modern programming languages, including the JIT compiled Julia and visual programming language ADL from Trading Technologies. My conclusion (based on a not very scientific sample) was that we appear to be at the tipping

A short while back I wrote about the seasonal tendency for soybeans to advance in price between early February and mid-June. Well I hate to anger the commodity gods by something stupid like “So far, so good” but, well, oops, I just did. As you can see in Figure 1, well, so far so good (now

I’ve been seeing mixed evidence over the last few days. In yesterday’s blog I showed a study that suggested short-term bullish inclinations. This morning’s study makes a case for the bears. It suggests that big intraday rallies like we saw on Friday that have been followed by tight

Tomorrow I’m hosting the live webinar “Portfolio Construction, Concentration, and Diversification for Value Investors.” There are only a few spots available in the room. The webinar will focus on portfolio construction and position sizing for value investors, including the philosophy of

I’m sure we’ve all heard about diversified stock and bond portfolios. In its simplest, most diluted form, it can be comprised of the SPY and TLT etfs. The concept introduced by Logical Invest, in a Seeking Alpha article written by Frank Grossman (also see link here), essentially uses a

We show that aggregate short interest is one of the strongest known predictors of the equity risk premium. High aggregate short interest predicts lower future equity returns at monthly, quarterly, semi-annual, and annual horizons. In addition, aggregate short interest outperforms a host of popular

I was asked by a reader if I could illustrate the application of the Kalman Filter technique described in my previous post with an example. Let’s take the ETF pair AGG IEF, using daily data from Jan 2006 to Feb 2015 to estimate the model. As you can see from the chart in Fig. 1, the pair have been

According to Factset, S&P earnings growth for the calendar year 2015 is now expected to be just 2.9% (vs. 8.2% expected growth on Jan 1). Still, most people seem to believe that the S&P 500 will have a decent year. How frequently does it happen that earnings growth is weak but performance is

Notable about Friday’s market action is that it marked the 2nd day in a row that SPY posted an outside day. (An outside day is a day where the security or index makes both a higher high and a lower low than the day before.) Back-to-back are fairly rare. I last discussed this setup in the 1/10/2014

The Mojena Market Timing strategy (Mojena), developed and maintained by professor Richard Mojena, is a method for timing the broad U.S. stock market based on a combination of 11 monetary, fundamental, technical and sentiment indicators to predict changes in intermediate-term and long-term market

To install Systematic Investor Toolbox (SIT) please visit About page. The Quantitative Approach To Tactical Asset Allocation Strategy(QATAA) by Mebane T. Faber model is using 10 month moving average as a filter to switch strategy to cash. If at the month end the asset’s price is above the moving

Most automated trading systems (ATS) are built such that there are little to no interactions between component models. This is limiting. Here I am referring to a trading system as the overarching architecture that houses multiple individual models. Without interactions, each model is operating

An R Tutorial for Microsoft Excel Unsers (Revolutions) Backtesting A Basic ETF Rotation System in Excel (System Trader Success) Regulating CEO Narcissism (Bodt, Bollaert, and etal) Value, Momentum and market Timing (Filippou and Garcia-Ares) Speed of Information Diffusion

This post is a continuation of the prior post. In this post we will look at the backtest results for dynamic exits of 38 days-to-expiration (DTE) Iron Condors (IC), with 12 delta short strikes, with different profit and loss exits as a percentage of the initial credit. Recall that these RUT ICs were

So thanks to seeing Michael Kapler’s implementation of David Varadi’s percentile channels strategy, I was able to get a better understanding of what was going on. It turns out that rather than looking at the channel value only at the ends of months, that the strategy actually keeps track of the

Having decided that I'm going to use my mfe_mae indicator as a target for my neural net, over the last couple of months I've been doing some research on what would make good features for this target. In the course of this I've also decided that Particle swarm optimization would be a

Estimize is a crowd-sourced network which collects structured financial predictions submitted by its users, many of whom are professional analysts. Users can make predictions ranging from what next month’s unemployment rate will be to what a stock’s next quarterly earnings report will say. There

Fundamental Rule #1: For most investors, financial risk is singularly defined as the probability of not reaching financial goals. As such, the sole objective of investing is to minimize this risk. If you are an average investor with a typically basic understanding of investing, Rule #1 above will

One of the challenges with the cointegration approach to statistical arbitrage which I discussed in my previous post, is that cointegration relationships are seldom static: they change quite frequently and often break down completely. Back in 2009 I began experimenting with a more dynamic approach

Despite new highs, volatility still elevated $SPY $VIX

Good start of the year for the Wizards, who started the year with a collective +5.63% in January. Please see below for full individual results. Organisation / Fund Return YTD * AUM ** Abraham Trading1 4.93% 4.93% $272M Altis Partners2 9.67% 9.67% $335M Aspect Capital3 4.60% 4.60% $5,105M Beach

Ilya Kipnis at Quantstrat recently posted some R code attempting to replicate the ever-popular Percentile Channel Tactical Strategy. The results are similar but not exactly in line- which may have to do with the percentile function as Ilya has pointed out in the comments. In either case, the general

On November 2013 I published the first SA article on the Bond Rotation Strategy (BRS) (http://seekingalpha.com/article/1845022-the-sleep-well-bond-rotation-strategy-which-has-returned-15-percent-per-year-since-2008). Now, 15 months later, I am presenting an important update for this strategy. Even

Fast food has been on a roll as of late. The rate of Google searches for for the term “hamburger” is at all time highs, and investors in fast food stocks are enjoying tasty returns. Burger chains such as Red Robin (RRGB) and Jack in the Box (JACK) have more than tripled since 2011, with similar

Welcome Year of the Sheep (or goat or ram depending on location). Although the Chinese New Year is not a major holiday for North America, it most definitely is for our friends and business associates in China, Hong Kong and elsewhere in the Asia and Chinatowns around the world. Celebrations will

In a prior post, I waxed philosophical about the importance of remaining skeptical of the assumptions that underlie portfolio construction. Another commonly accepted assumption is that rebalancing is a value-add activity. The underlying theory here is that assets tend to mean-revert over time, so by

I’ve been working at The University of Manchester for almost a decade and will be leaving at the end of this week! A huge part of my job was to support a major subset of Manchester’s site licensed application software portfolio so naturally I’ve made use of a lot of it over the years. As of

Last week we presented some evidence that the total daily trading volume for SPY could be predicted from the first minute’s trading volume. We accomplished this using an Archimedean copula, a mathematical construct for modeling multivariate data. Interpreting a copula from an intuitive standpoint

Happy Chinese New Year! May I wish you all a fruitful and prosperous Year of the Sheep in 2015 – especially to my new friends from Hong Kong that I met on my trip there this past December where I gave an evening seminar and a full-day workshop all organized be my colleagues at Earlthorn. In some

In the Credit Suisse Global Investment Returns Yearbook 2015, there is a section dedicated to industry group analysis. Beyond an interesting history lesson about the rise and fall of certain industries, the piece demonstrated the strength of both momentum- and value-based investing when it came to

This post will detail an attempt at replicating David Varadi’s percentile channels strategy. As I’m only able to obtain data back to mid 2006, the exact statistics will not be identical. However, of the performance I do have, it is similar (but not identical) to the corresponding performance

Our DO-IT-YOURSELF Investing Tool is Live! You can build your own stock selection and asset allocation models using our DIY Investing tools. How to Access the Tool? Step 1: Click "Our tools" tab from our main website page.

I sent this to The Idea Farm last week – this is always my #1 read of the year, the CSFB Global Investment Returns Yearbook! This is the annual update to my favorite investment book,Triumph of the Optimists. Included this year is a near 100 year backtest on industry rotation based on value and

Historical search volume presents a wealth of information. Recently, we presented a way to use Google Trends to predict stock market directiontsla_real_vol_, looked at the correlation between searches for the term “stock market” to the value of the VIX, and used searches for “farmville” to

In case you were not aware of it, I have a “thing” for seasonal trends. Certain commodities are especially well known for exhibiting “seasonal” – or “cyclical”, if you prefer – trends. I’ve talked a bit recently about crude oil and energies here and here. Another market that fits