I finally understand why 1 and 2 happen!!! While I can't explain the causes of why the market enters phase 1 or 2, it shouldn't matter empirically. I do now understand that those two are solutions to market equations, but I don't get why the market chooses one over the other on a particular day. I am not sure I care if I am able to "ride the wave", other than it would be neat to understand causation. The choice by the market might be random, but it is too soon to decide that and would be a cop out. This is huge and the final insight. I have to rework the model so that it represents the solution to the equations correctly. It is no small feat, but should be workable. So two changes that are comming are: 1) Change the lookahead of POFVF to be a function of the level of VIX. 2) Change the model to value SPX internal momentum (hint to self, TE). This is hard.
Your capacity to believe your own bs models is incredible. Remember when you posted that making 20% a year on conservative investments was "easy" ? Despite the fact that this is impossible ( the whole world would make 20% if it wasn't ), you looked at extremely short term returns and extrapolated a broad theory on it. And here we are again, you are doing it again. Look at the results. Name one conservative investment that made 20% in 2011. Anything. Secondly, graph your indicators versus actual market moves. It will tell you something you are unwilling to accept. I suspect in 5-10 years you'll look back on your theories and posts and understand the silliness of your approach.
SPX, 1261.49. FV, 1057.09. OFV, 1135.31. POFVF, 1234.59 5-Day POFVF = 1228.09 : 1241.09 : 1246.09 : 1236.09 Another update so we can see how the model reacts as the market moves higher, on prediction that it should go lower.
SPX, 1262.79, FV,1059.99. OFV,1161.43. POFVF, 1244.49 5-Day POFVF = 1241.99 : 1246.99 : 1236.99 : 1219.99 POFVF is fading fast, but note there is a slight rise first, even though all values are below SPX.
Someone asked me what it means to have "solutions to the market equation". FV takes on a form very similar to this: ax + by + cz - dq ... (there are higher order terms as well but no matter) So it is similar to a [partial] differential equation. I can plug in values into x,y,z,q, and with the right parameters a,b,c,d, it will give me the value, "FV". but to solve this equation, we would have to integrate it. http://www.intmath.com/differential-equations/1-solving-des.php So for instance, the solution to this quadratic equation x^2-4x+3 = 0 is x=1,3. Someone figured out how to solve quadratic equations long ago. What makes solving some equations is when the solutions aren't nubmers, but functions themselves, like the solutions in the link above to differential equations. So for example, the solutions to Einsteins Field equations are very complicated and we don't know if we know all of them. FV equations are like the Einstein Field equations, the solutions aren't numbers, but functions themselves.
I had another insight, and realized that the inputs are incomplete. I added this input to the model. I don't blame you if you never come back and look at this thread, since it appears that this model changes faster than Kim Kardashian has boyfriends. But I must correct as I learn more. New model: SPX, 1259.78. FV, 1075.27. OFV, 1176.65. POFVF, 1259.77. 5-Day POFVF = 1257.27 : 1262.27 : 1252.27 : 1235.27 Note that SPX and the current POFVF are almost identical. Thing is, I know I don't have the final way to integrate the new parameter because it always acts positively, and almost always by the same amount. That can't be right, but I know it has to be in there somewhere.
SPX, 1257.61. FV, 1073.76. OFV, 1175.14. POFVF, 1258.26. 5-Day POFVF = 1255.76 : 1260.76 : 1250.76 : 1233.76 Closing values for the year.
This is the tone the market will be opening to on Tuesday, and it looks ominous: "Spain revises up 2011 budget deficit forecast to 8 percent of GDP; fresh austerity announced" http://finance.yahoo.com/news/spain-revises-deficit-raises-taxes-151259189.html
Its like you're watching a day old ticker tape sir. European markets in something of a melt-up today. You are the absolute definition of amateur hour.