Posts filed under “Quantitative”
In our office, we’ve been using the Fusion IQ quant system for so long, we know it inside out. We use it as the basis for our institutional trading and published research (up ~10% for the year).
Subscribers have asked us to include our market and stock commentary — beyond the pure neutral software application. In addition to the tools index rankings, there is also an “S&P 500 Marketometer” — an intermediate term gauge of the S&P 500’s internal health. We use this as the basis of our own market review. As requested, we include our own application of the quantitative equity ranking system. This means in addition to the equity, index and sector work, we upload our own technical and macro commentary, too.
My partner Kevin Lane
is a well regarded technical analyst who built his reputation
recommending Enron and Tyco be shorted long before it was fashionable. He is usually the yin to my yang, bullish to my bearishness. Here is his most recent technical commentary about the S&P500:
S&P 500 Index (SPX) – Daily Chart (1999 to Present)
As seen above the S&P 500 broke through what was once a solid support area (green lines and maroon dotted circle) in the last few days of trading last week and continued falling. This support break was critical as it sent a message to market participants that this corrective phase is not yet over. The next support zone for the S&P 500 now comes into play in the 1,015 to 960 zone (blue dotted lines). At these lower support levels, particularly the 960 level, we would likely see a powerful rally set up as the S&P 500 would hit support while also being deeply oversold and more than likely have absorbed a massive selling purge. These aforementioned factors along with a likely new 10-year high in the VIX (if this lower support level is hit) would suggest negative sentiment had peaked.
Trend, Breadth and Momentum are all bearish; Liquidity is bearish to neutral. The only element that is remotely bullish is Sentiment.
As we said to clients early last week (prior to these supports being violated) market internals and momentum were all very negative and the path of least resistance would remain down.
This still remains the case.
Here is yesterday’s featured segment, Breakouts & Breakdowns on Fast Money with Dylan Ratigan.
Here is last night’s episode:
Breakouts & Breakdowns: An outlook on PNY and NEM, with the Fast Money traders
The name Fusion is supposed reflect
that we use both technical and fundamental data points.
metrics we track are Trend (short, medium, and long term), Money
Flow (stock and group), Short interest (relative to
float), Institutional Ownership, (we crunch it ourselves between official
quarterly releases), Earnings Trend (are they still ramping, plateau-ing,
reversing or falling), and Forecast Earnings Surprise.
The name Fusion is supposed reflect
metric is quite fascinating. we take the top analysts on any name in terms of
their recent earnings forecast record. When they are an outlier against the rest
of the analyst community, we often — about ~68% of the time — see an earnigns
surprise. I.E., when the top guy is bearish, and the rest of the dead fish are
bullish, you tend to see an downside surprise (and vice verse). Think Bove and
Whitney versus the geniuses who downgraded Lehman today. When we get towards erarnings season, I’ll pull a few
names. Its pretty wild stuff.
Our projected holding period is 3
months, plus or minus — but we hold longer if working (i.e., we are still short AIG from last year),
and always use stop losses when they are not working (i.e., covered the short in RIMM for a 5% hit).