Predicting Volatility: Stress about Iraq war counters SuperForce.com system
Do natural ion ratios affect human behavior? SuperForce.com now has 48 months of forecasted data, in which 372 polarity shifts were predicted beforehand. These shifts were used as a basis for an algorithm trading system and then calculated against the outcome of the stock markets. Phantom Stock trades.
The past 12 months (2003) showed a flat return for the Dow, NASDAQ and S&P 500 using the SuperForce system. However, when we look at a chart of the past 24 months of data for each market we find the problem occurred during the first three months of 2003, it took the next 9 months to recover from the first three months. The low point was March 19, 2003 which happened to be the date that President Bush declared that combat had started in Iraq. We also find that after the September 11th terrorist attacks the Superforce system was flat for about five months.
Phase Q represents the forecasted peak of the upward movement or forecasted valley of the downward movement of the markets. In this case we have 372 points where the algorithm forecasted a changed direction and treated the Volatility index (VIX), we then ran the VIX through as we would a stock with the above results.
Volatility Index (VIX)
The Volatility Index is a way to track caution and fear in the market place by tracking the options market. We have run the Volatility Index through our algorithm using the same days we trade on and found the following attributes. On positive ion ratio days the VIX moves down meaning people are not as cautious. On Negative Ion Ratio days the VIX moves up, Negative days are good for people but bad for the markets as people tend to be more level headed (they look both ways before crossing the street). Our monthly trading system is based on our exclusive algorithm that forecasts these fluctuating Ion ratios ahead of time.
While the Volatility Index is only a tool, I have posted the results from the Dow Jones Industrial average and we find an almost identical trend with our system as we did with the VIX.
We do not take into account commissions or short selling rules in our phantom portfolios.
The fact that behavior changes take place around stressful events such as September 11th and the War in Iraq is generally expected. The fact that these changes show up as contrary to the SuperForce system indicate that the expected reaction is opposite during heavy stress.
Usually we expect a "play it safe" mode on a negative day - the markets generally go down, however, during high stress the reaction in the market is the opposite and the markets go up, this could be due to the perception of easing tensions on both sides of a showdown scenario during higher negative polarities so investors may feel inclined that war may be averted. Whereas the reaction on a positive day during a showdown is for the markets to go down, rather than the euphoric greed we normally see on positive days, we see real panic and depression due to world events and the markets go down.
Four years of back testing shows there is a consistent general upward trending we see in the major indexes after 744 trades; each one of the 372 points represents a short or long each of these requires two trades: Short = Sell and a Cover, Long = Buy and a Sell.
While a more than a few initially regarded these ideas as flaky, the relationship between the SuperForce algorithm based on varying ion ratios in the air we breathe and changes in human behavior, psychology, and physical fitness levels, it is becoming more obvious that there is indeed a correlation here.
The market volatility index computes volatility of four OEX contracts in two nearby months, one call and one put just out of the money, and one of each, just in the money, for each of the two front months. Source: CBOE
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Sincerely, Guy Cramer, President, United Dynamics Corp.
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