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How my system predicted the recent downturn? By looking at the data objectively

My system predicted the recent market downturn that brought the Dow Jones from a high of 26616.71 on 26th Jan 2018 to the low of 23850.46 on 8th Feb 2018, a drop of 10.39%.

For the past few months I have been sharing my weekly market analysis free via my blog and other social medias. In those posts, I shared about what happened in the market for the current week and gave an analysis of my system's perspective on the market outlook for the following week. I also shared what my system is likely to do for the following week.

Since 20th Jan 2018, my system started to give warning signals that the market is overheated based on the analysis run on the data by the system and risked a downturn. It has also stopped loading stocks into the portfolio. Here is the list of posts that I made from 20th Jan to 9th Feb 2018.

11 days later, on 31st Jan 2018, Renaissance Technologies mentioned the same thing in an article on Bloomberg.

Even though I was met with skepticism when I posted these warnings, the prediction really came true. The downturn really happened.

This indicator, which is part of the system's risk management module, has protected the portfolio from disaster in February 2018. My portfolio outperformed the S&P500, posting a minute loss of 0.06% while S&P500 and Dow Jones posted losses of 3.89% and 4.28% respectively in February 2018.

What I learnt all these years as a quant is that, many times, a computer can do a much better job when it comes to being objective. We humans are prone to bias and tend to place more weight on what is current and what many others are saying.

Starting from 1st March 2018, the weekly analysis is only available to paid subscribers.

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  1. Thank you for sharing such valuable information and knowledge. It is very useful and informative. It would be great to see more updates from you soon.

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  2. Thank you. I'm glad you find it useful and informative. Will continue to post interesting stuff here =)