Market Update 8.24.24

This week’s market performance closely mirrored our projections from last weekend. The predicted end-of-week prices for the DIA, SPY, and QQQ were remarkably accurate, reflecting the precision of our forecasting models.

As we look ahead, the market appears to be approaching a medium-term exhaustion point. Our model indicates a significant decline in the probability of positive returns, now falling below our nominal threshold of 63%. For the DIA, the probability of a positive return is a mere 45%, accompanied by 7-day predicted changes that come with wide standard deviations, extending into negative territory. Investors holding leveraged bullish positions should proceed with caution, as the market’s current dynamics suggest increased risk.

Model outputs as of market close on 8.23.24.

The chart above displays the predicted changes in selected market indexes, with whiskers representing one standard deviation. Notably, the 7-day standard deviations extend significantly into negative territory, suggesting that any "bad news" could trigger substantial market pullbacks next week. On the other hand, there's also a considerable potential for gains, as the upper whiskers indicate possible extensions into positive territory. As a result, our outlook on the market is neutral at this point—neither bullish nor bearish.

The bar chart above illustrates the probability of positive returns across different time horizons. Our model sets the nominal probability of positive returns at 63%. The probabilities shown in the chart fall significantly below this average, signaling an exhausted medium-term bullish market.

Market Update 8.17.24

Our model for 7-day expected returns proved accurate within half a standard deviation for DIA and SPY. QQQ 7-day forecast was exceeded by 0.7 standard deviations, but within our acceptable tolerance of one standard deviation.

Looking forward to next week, we see an increased likelihood of choppy markets. The probability of a positive return is much lower. In some cases, it is below our nominal positive probability point of 63%. The projected 7-day changes are still positive albeit with standard deviations that reach negative territory. This emphasizes the entry window's importance in positively affecting medium-term portfolio growth.

Model outputs as of market close on 8.16.24

Whisker plot of projected changes and standard deviations.

Bar chart of probability of positive returns.

Market Alert 8.14.24

This is a mid-week market alert. The High-Probability bullish pivot window has closed. While there is still notable upside potential, the window that we define as the highest probability entry point has passed. The window opened on 8.2.24 and closed 8.13.24.

US Equity Market Directional Pivot In Progress

Looking ahead to next week, the projections for DIA, SPY, and QQQ suggest a favorable outlook with high probabilities of positive returns, particularly for DIA, which has an 85.7% probability of positive returns over the next 14 to 28 days. Relative to the model’s nominal positive probability of 63%, this is significantly higher than average. SPY and QQQ also have positive expectations, though with slightly lower probabilities of around 64.3% and 69.0%, respectively. As the week progresses the probabilities for SPY and QQQ are expected to increase. Given the current data, we can anticipate a continuation of the market's upward trend, although volatility is likely to persist as traders remain cautious ahead of key economic reports​

Predictive model outputs using data through 8.9.24.

Projected returns with +/- one standard deviation.

Probability of positive returns over various time horizons.