Monday, June 29, 2015

A New Mean Reversion Model .....MR....06.29.15

Even if you were a talented fiction writer you couldn't come up with the plot twists we saw over the weekend in the on-going Greek tragic comedy. (see piece at the end of this post).
Meanwhile I've been working on a new model than incorporates elements of the 3 day low model and a more true mean version algorithm.  We'll be adding this model our daily signal update as it provides a completely different take on market dynamics than the LM and M3, which are momentum and relative strength based. As you may see in the screen shots below the model has a number of permutations.  We can simply look at a single equity...such as SPY, or we look at several issues such as SPY, QQQ and IWM to see if there exists a market wide mean reversion dynamic in effect.  We'll post a few more variations of  MR in the coming days including a long/short version. Once again, our goal is risk mitigation and maximizing the RSQ linearity of the equity curve and MR looks promising in that regard so far.