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 MarketTrak Question/Comment Message


Posted By: Jim   Date: Fri Feb 20, 2009

Title: Meaning of ANO values near zero

Message:
  Does an ANO value near zero mean that the model does not expect the market to move much?

Response:
  An ANO value near zero does not necessarily mean that the market will not move much. It could mean that the model could not classify the market state because of mixed signals and therefore it concluded that the safest position would be cash. The graph below gives some examples of this:

This is a plot of the actual forward slope vs the model ANO values for about 6000 days of market data. Note for ANO values near zero, the actual slope has some rather large positive and negative values. In these cases, the model was unsure of the market direction and gave a cash signal. The ANO set points, given on the forecast page, defines the cash region. The line through the data was determined using a least-squares procedure.

 

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