Over the next week or so, my focus will be on advancing the web portal development, so these letters will be done quicker than usual. The depth of analysis, therefore, might not be up to my usual standard.
S2N Spotlight
I came across an idea where an analyst suggested that when the SP500 and Gold reach 52-week highs on the same day, it sometimes leads to weakness in the SP500. The analyst was observing 5 years of data, which is way too short, and his conviction of “sometimes” was not too inspiring. I decided I liked the idea of visualising the concept, so I applied it in a few ways.
Below, I plot Gold (XAUUSD) and SP500 (SPX). I am not sure there is compelling evidence in this chart. I am sounding as hesitant as the analyst I quoted.
I thought it might be interesting to look at gold and bitcoin, just to see how often they reach new 52-week highs on the same day. I can say nothing conclusive other than that it does look like these blue arrows appear at turning points; it is interesting and probably worthy of deeper analysis.
While at it, we might as well look at Bitcoin and Ethereum. It seems to catch turning points for Bitcoin but is littered with false positives, so it is not likely to be a reliable indicator.
In conclusion, I like the idea of visualising indicators that match different symbols on the same day with markers. In the future, I will explore this with different indicators.
S2N Observations
I came across this analysis while sorting things out. The pink line is our current event, as I think it is safe to say July 2023 was the last hike in the cycle. The black line shows the average performance over the next 2 years from such an event. From what we can see, the market’s current behaviour is in line with previous occasions.
A friend of mine, Tommaso Gastaldi is a Professor in the Department of Statistics and Department of Computer Science at “Sapienza” University, Rome. He recently published a heavyweight academic paper that I sadly was not smart enough to fully grasp. I do know that Tom is not only super smart (definitely of the genius variety) but he is a practitioner. He is trader and steeped in the lessons one can only learn by doing. I think this is what differentiate him to most academics in the field and is probably the genesis of the idea behind the paper. Tom’s paper was recently published in a non mathematics format, you can read it here. If his work interests you Tom is one of the most approachable people you can hope to meet and I am pretty sure he would love to dialogue about it.