Correlations closed .39 increasing by .11 week over week.

In our last weekly recap we noted that there was still an upside bias a mean of just over 1% for ten trading days.  6 trading days have passed and we are 1.4% higher, surpassing the ten day target mean return.

Our report shows little evidence in what is currently tracked that we will be materially higher in ten days. Most long term ratios are not trading at extremes and our vix bias is fairly neutral with short term and one month vol only slightly lower than the 75th percentile readings (will settle realized volatility lower 75% of the time).

The new models we are working on, however show a different story. The screenshot below shows a very small portion of the models we are working on.  The idea is to do a massive data search without fitting the model at all.  The model only seeks to pattern match the current day volatility ratios to historical similarities.  The ratio of the VIX to short term VIX (VIX9D or VXST on appears to be particularly bullish.  There are 39 historical (potentially overlapping) samples closing higher 94.87% of the time ten days out with a t-test of 6.6 and mean return of 1.3% (blue line).  This makes it hard for us to get immediately bearish despite all the other extremes we are seeing in the market.  Do note, however the left tail of about -5%.  Price will obviously tell you if this prediction is going to be correct or not.

Thanks and as always if there is anything material to update you with, we will.