Tagged: analytics

Sun and Goggles

Mayday!

That’s the word quarterback Peyton Manning should’ve used Sunday, instead of Omaha! But we congratulate Coach Pete Carroll, a gentleman, and his bruisers from the Puget Sound.

Speaking of bruising, earnings season and macro factors collided like particles in an accelerator as January slopped into February. With just 58% of our client base reporting thus far, it could be premature to deconstruct it. But I know the question burns in IR minds: Can we understand what’s going on?

People sequenced the human genome. We can measure variance in light as finite as a flashlight blinking…on the moon. We can create money from nothing. Surely we can map market behaviors.

I was skiing in Steamboat last week during a whiteout. It was though I was floating. I had no clear sense of where the slope was until I carved, and I could not gauge my speed until I turned. Powder is forgiving so I wasn’t worried.

But this is how the market seems many times, right? It’s amorphous. There’s no definition to movement. No clarity.

The next day in Steamboat, the sun shone brightly and with goggles suited to light, fresh powder took on the rich and textured characteristics of a Wayne Thiebaud painting. Slopes were luxuriant and vivid.

There are two pillars to market movements, like bright light and the right goggles. I’m not suggesting one can perfectly matrix outcomes. But core principles can be observed.

Remember: We said the market reached a statistical top in our behavioral data on Dec 27. We then warned that if institutions shifted from equities with options-expirations Jan 16-22, the first shoe to drop would be Jan 23-24.

That happened.

In the days since we’ve warned that Shoe No. 2 of a process of retrenching from equities and shoring up institutional risk-hedges could occur during January window-dressing, which would mean Feb 3-4 could be ugly.

That happened.

Markets reached a statistical market bottom, behaviorally, on Feb 3. The same sentiment-reading registered in our data-analytics roughly June 28, 2013, and again about Aug 11, 2013, the last two times data indicated market bottoms (markets then rebounded).

(Warning: This time could be different. We’ve never massively removed central-bank support from global risk assets before.).

You must cease viewing the market as just investment and instead see it as risk-management and data. These are the pillars. One is sun, the other goggles. If risk managers shift resources in asset classes, it will impact trading data that machines consume, because movements depend on mathematical models now. (more…)