Market Timing

- In this Blog, my reference to ‘the market’ is the SP500 ETF (SPY)

This market we are in now (and have been in for the last 3 months) is one of most difficult, most dangerous markets we have seen in many decades (like all the way back to 1933).  

In the last 80+ years, the SPY has ‘averaged’ gains/losses of roughly 12% per year.  That results in average ‘changes’ of about 1% per month (or 0.05% per day).  This 2020 market dropped 34% in 1 month and 14% in two days.  And, the market changed over 8% in a single day several times in the first quarter.  

See stats below for the SPY in the year 2020:
   1) One Month (Feb 21- Mar 23)     -34%
   2) Five Days (Feb 21 – Feb 27)    -15%

   3) Two Days (Mar 11- Mar 12)      -14%

   4) One Day (Mar 16)                     -11% 

You have to be aware that those kinds of movements are much, much faster (and larger) than any in the past; and that makes them very dangerous and very difficult to 'track'.  Few (if any) trading techniques (or retail timing models), are now designed to work well in this type of market behavior.  For example, some of the top performing timing models in 2020 YTD ranked by 3rd party tracking companies have terrible long-term performance records.  Outside of stock markets, if a fighter jet is programmed to travel at 3,000 mph (like the USA’s F15), it would fail in combat with an enemy jet travelling at 8,000 mph (if possible).  So, in all cases like this, the software would need to be updated to handle any and all new faster acting conditions.  
 

We at MIPS are not just sitting around in this crazy market that moved faster in a small part of one month (Feb'20) than any other market has in the last several decades.  MIPS is currently designed to work well in fast markets, normal markets, slow markets, and flat markets. The recent market behavior has shown us that we need to add very fast moving market conditions to our models; together with protection from large daily losses from markets with unusual high volatility . 

Our development team has been working 16-18 hours daily for the last 10 weeks adding these new features to our models.  I am thrilled to say that we have added several algorithms to help MIPS perform much better in very fast moving markets with unusual high volatility.  The performance results from our new models are significantly better; and with a little more testing we will release the new versions of all MIPS models very soon. The graph below shows that the new version of the MIPS/Nitro model would have produced results roughly two times better than the current version.

Confidential - Below is how the new MIPS/Nitro model's performance looks now (in final testing)
   Black   -  New Fast Moving/Highly Volatile (FM/HV) MIPS/Nitro Version of the Model
  Orange - Current MIPS/Nitro Model