#150: What Goes Up Must Come Down

S2N Spotlight

I am a simple guy; too much of a good thing is not good. Too much of a bad thing is bad. Aiming for the middle of the road is a virtue. I believe in what Aristotle called the “doctrine of the mean.”

I’m deeply concerned that markets continue to hit new all-time highs, despite being far above their historical averages. This goes against the normal laws of nature, especially in a world burdened by unprecedented debt and geopolitical instability. When things are too good, it is likely to lead to instability.

By measuring the distance in Z-Score from the mean, I am able to calculate the probability of the current return remaining at the level. You can see on the charts there is a : 10% chance that the Nasdaq replicates the current returns. 7% the S&P 500, 0.78% gold, and 72% the US Dollar. [for the more technical amongst you, I use this function 1 - norm.cdf(z_score)]

S2N Observations

I am still away, so today is an observation free day.

Performance Review

For those who are new to the letter, the shading is Z-Score adjusted so that only moves bigger than usual for the symbol are highlighted.

Chart Gallery

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