X-INDEX FUND Magazine Issue 5: December 2011 SNEAK PREVIEW
Dec
9
Written by:
Friday, December 09, 2011 11:54 AM
X-INDEX FUND Magazine Issue 5: December 2011 SNEAK PREVIEW
By Johan G. van der Galiën.
Definition X-Index Fund
This index fund is composed of initially the 50 lowest entropic (= X-Index) ones from 1,924 New York Stock Exchange (NYSE) securities whereof stock quotes can be downloaded with HQOUTE PRO. These 50 are among the securities with the potentially highest profitability in the last bull market and the bull market yet to come. From these initially 50 securities there are at the moment still 41 actively traded. So these 41 securities, 10,000 shares per security, bought virtually all at once for about $ 1.8 million in total on 2011-08-08 closing prices, is the X-Index Fund or also called DOWN41 portfolio in this magazine.
The X-Index Fund portfolio
From a list of 3,461 NYSE ticker symbols, from the Dutch Wikipedia, HQOUTE PRO could download only stock quote files from 1,924 of these 3,461 securities. These files were analyzed by ‘The Automated X-Index Technical Analysis Software’, that curve fits to a distribution function I would like to call Omega (Ω), and entropy ranked. A 50 down ranking securities portfolio (DOWN50) was drawn and the ticker symbols, closing prices at 2011-08-08 (purchase day virtual portfolio) with 10,000 shares per security data were uploaded to Google Finance. After carefully inspecting the resulting spreadsheet, for 7 out of the 50 securities in this portfolio there was no trading anymore for various reasons or too less trading for Google Portfolio to take them into account or the ticker symbol is not a Google recognized one from the NYSE. Nonetheless remained 43 valid ticker symbols and consequently I spoke of the DOWN43 in ISSUE 1 of this magazine.
Now I must speak of the DOWN41 portfolio because meanwhile the trading has also stopped for ticker symbols SFN and GMR. Please note that IRE has had a 10:1 reversed split in October 2011 and also MAG in December 2011.
There is a discrepancy between Yahoo! and Google in the nomenclature of the EXE ticker symbol company, i.e. iMergent or Crexendo. But this seems to be the same company, at least the quotes are the same. With iMergent being the former name.
For all the other 40 ticker symbols the names between Yahoo! Finance and Google Finance are in sync. This gives confidence that the (historic and recent) quotes are also comparable and that the HQOUTE PRO historic data (downloaded from Yahoo! Finance but shown in Google Finance Portfolios) for the technical analysis is adequate for finding 41 low entropic securities.
The resulting DOWN41 portfolio
|
Ticker Symbol
|
Closing Price ($) 2011-08-08
|
# Shares
|
|
CBR
|
3.07
|
10000
|
|
CPE
|
4.9
|
10000
|
|
CSU
|
7.15
|
10000
|
|
CT
|
2.25
|
10000
|
|
EK
|
1.86
|
10000
|
|
EXE*
|
3.71
|
10000
|
|
FCH
|
2.85
|
10000
|
|
FCS
|
12.27
|
10000
|
|
FR
|
7.81
|
10000
|
|
FRM
|
6.41
|
10000
|
|
GKK
|
2.35
|
10000
|
|
GPK
|
3.66
|
10000
|
|
GSL
|
2.84
|
10000
|
|
HL
|
6.66
|
10000
|
|
HW
|
2.00
|
10000
|
|
IO
|
5.06
|
10000
|
|
IRE
|
11.30
|
1000
|
|
LSI
|
6.23
|
10000
|
|
MAG
|
14.50
|
1000
|
|
MEG
|
2.30
|
10000
|
|
MIM
|
24.96
|
10000
|
|
MNI
|
1.69
|
10000
|
|
MPG
|
2.25
|
10000
|
|
NCT
|
4.06
|
10000
|
|
NLS
|
1.66
|
10000
|
|
NTE
|
4.90
|
10000
|
|
NWY
|
4.12
|
10000
|
|
PKD
|
4.91
|
10000
|
|
QTM
|
1.77
|
10000
|
|
RAS
|
3.39
|
10000
|
|
SFI
|
4.61
|
10000
|
|
SRZ
|
5.93
|
10000
|
|
STM
|
6.31
|
10000
|
|
SWS
|
4.08
|
10000
|
|
TCI
|
2.26
|
10000
|
|
TGS
|
3.05
|
10000
|
|
THC
|
4.63
|
10000
|
|
TLB
|
2.79
|
10000
|
|
TRR
|
3.93
|
10000
|
|
VG
|
2.88
|
10000
|
|
ZLC
|
3.84
|
10000
|
Table 1: Google Finance upload data.
Forecast market until 2012-01-07
Fig. 1: Overall X-Index and (+/-) 85% Confidence Level SEM curves calculated over a 20 trading days time window. And $ (Fund) Value and Dow-Jones Industrial Average 20 trading day snapshots. Curves are all standardized to be able to compare them in one graph. Modified screenshot EXCEL graph.
The Overall X-Index curve of Fig. 1 looks a little bit different than the one in ISSUE 4. this can come from several reasons. First there is now a 4 day time shift in the 20 days time windows compared to ISSUE 4. Second we have now 2 out of 41 1:10 reversed splits (IRE and MAG) which HQOUTE PRO does not backwards adjust. Next time I leave them out.
As we have seen in the Fig. 1 graph, the X-Index curve goes (sometimes) violently up and down, this comes from a combination of numerous (+/-) effects. Some major ones are shown in the following EXCEL scatter plots against the X-Index with linear regression:
Scatter plot 1: Relative trend over period of technical analysis from 1617 securities (Relative trend < 100% because HQUOTE PRO does not correct for reversed splits as it does for “normal” splits) (-) weak: If the Overall X-Index becomes smaller (i.e. more negative) the tendency for positive trending increases and vice versa. (Clustering around zero Fig. 1 ideal red band)
Scatter plot 2: Signal-to-Noise-Ratio (SNR = μ/σ) over period of technical analysis from 1617 securities (Relative trend < 100% because HQUOTE PRO does not correct for reversed splits as it does for “normal” splits) (+) very strong: If the Overall X-Index increases SNR increases (i.e. relative risk decreases) and vice versa. (However peak seems to be at X-Index = 0 Fig. 1 ideal red band)
Scatter plot 3: Closing prices at the end of the period of technical analysis from 1617 securities (Relative trend < 100% because HQUOTE PRO does not correct for reversed splits as it does for “normal” splits) (+) strong: As the Overall X-Index increases the $ Value of the portfolio increases and vice versa. (However the peak seems to be around X-Index = 0 Fig. 1 ideal red band)
(+) = directly proportional with X-Index and (-) = reversed proportional. By all these and more effects the X-Index curves can look erratic but can nonetheless be explained (Table 3).
|
Period #
|
Period Fig. 3
|
Explanation
|
|
1
|
2010-09-29 to 2011-01-07
|
Rising of prices draw more buyers to the NYSE. Bull market. Strong decrease in X-Index within positive region. Consequently peak in Volume and Trading Activity. Because X-Index is far in the positive region this is a period of high positive Trending. Because trading decisions are partly based on (rising) former prices there is also high Autocorrelation. Low Volatility and Risk.
|
|
2
|
2011-01-07 to 2011-07-26
|
Stagnant (flat) stock market climate. Consequently side ways Trending X-Index and this is also true more or less for all the mentioned stock quote distribution properties.
|
|
3
|
2011-07-26 to 2011-09-09
|
Declining of prices draw more sellers to NYSE. Initially bear market then bear-to-stagnant transition at 2011-08-08. Severe deep dip in X-Index to negative region. Consequently period of zero to negative Trending and peaks in Volume and Autocorrelation. High Sigma and Volatility. At 2011-08-08 start of stochastic period.
|
|
4
|
2011-09-09 to 2011-10-07
|
Stochastic period seems to have stabilized far in the positive region, since the violently going up and down has stopped. When the X-Index goes from this point gradually down into negative territories, like the Santa-Claus-Rally of period 1, we can be sure that we are in a bull market rally again.
|
|
5
|
2011-10-08 to 2011-11-04
|
Forming of a shoulder. X-Index goes even further into the positive region. Meanwhile we got the best (October) month of the last quarter of a century. X-Index Fund performs very good as discussed earlier.
|
|
6
|
2011-11-05 to 2011-12-07
|
X-Index suddenly goes down to the Fig. 1 ideal red band in negative territories, and not gradually as I had hoped. It looks like the stochastic state is not over. This means past-present-future yo-yoing bull / bear days
|
|
7
|
Next 20 trading days forecast
|
Most likely NYSE will stay in this stochastic state, at most with a slight positive trend, which is understandable because of the present political and economical turmoil in the world (like the euro crisis). If the X-Index stays in the Fig. 1 ideal red band for the next 20 trading days then we are back in a bull market. We have to wait and see until next month!
|
Table 3: Explanation of the sections of Fig. 1 plus the forecast.
See also:
Johan G. van der Galiën ‘Recent Bull Periods and the X-Index Effect’ Journal of Randomics 10 1-10 (2011) http://www.satoconor.com
By Johan G. van der Galiën.
Satoconor © 2011