Predicting Volatility

Phase Q represents the forecasted peak of the upward movement or forecasted valley of the downward movement of the markets. In this case we have 267 points where the algorithm forecasted a changed direction and treated the Volatility index (VIX), we then ran the VIX through as we would a stock with the above results.

 

Volatility Index (VIX)

The Volatility Index is a way to track caution and fear in the market place by tracking the options market. We have run the Volatility Index through our algorithm using the same days we trade on and found the following attributes. On positive ion ratio days the VIX moves down meaning people are not as cautious. On Negative Ion Ratio days the VIX moves up, Negative days are good for people but bad for the markets as people tend to be more level headed (they look both ways before crossing the street). Our monthly trading system is based on our exclusive algorithm that forecasts these fluctuating Ion ratios ahead of time.

 

I reviewed the VIX and compared 2000, 2001 and the current 10 months of 2002 (34 months total) and discovered almost identical accuracy with the forecasted up or down direction. Year 2000 we correctly had 50 correct and 36 wrong while in 2001 we've had 49 correct and 35 wrong. So far in 2002 we have 48 correct and 38 wrong.

 

The difference shows up in the percentage loss on the incorrect forecasts

Year 2000 average movement on the 50 correct forecasts = 8.50% and average movement on the 36 incorrect forecasts = -4.36% while in 2001 we've seen the average movement on the 49 correct forecasts = 8.34% and the average movement on 35 incorrect forecasts =  -7.00%. 2002 shows an average 7.06% gain for the 47 correct and an average -5.32% for the 38 incorrect.

 

 

Year 2000

Year 2001

Year 2002 less Nov & Dec

Correct VIX trends forecasted

50

49

47

Incorrect VIX trends forecasted

36

35

38

 

 

 

 

Year 2000

Year 2001

Year 2002 less Nov & Dec

Correct VIX trends average percentage per

8.50%

8.34%

7.06%

Incorrect VIX trends average percentage per

-4.36%

-7.00%

-5.32%

 

 

Theoretically, if we only managed 50% correct direction in our forecast we would still be ahead given the difference in the average percentage of correct days vs. incorrect averages and if we only managed the same percentage averages on correct versus incorrect we would still be ahead due to forecasting more correct trends than incorrect.

 

While the volatility index is not a stock, it is a tool based on options. If it was a stock and you were able to trade it with our algorithm, phantom trading indicates that the would have shown substantial gains. We do not take into account commissions or short selling rules in our phantom portfolios.

 

A few months after SuperForce.com began forecasting Ion Ratios in the year 2000. A financial analyst looked at the (phantom) Stock correlation results and although impressed issued a note of caution. "You need three years of back testing before the Big Guns are going to consider it"! While it would have been simple to go back previous years, the data would have been questioned. "Did they alter their data to match the market data?" Instead we continued to provide forecasts prior to the days, weeks, months either through the site or to subscribers from January 2000 - Present, this way the data can be verified as being provided prior to the outcome (verifiable back testing = Objective vs. Subjective). 

 

While a more than a few initially regarded these ideas as flaky, the relationship between the SuperForce algorithm based on varying ion ratios in the air we breathe and human behavior, psychology, and physical fitness levels, it is becoming more obvious that there is indeed a correlation here.  

The market volatility index computes volatility of four OEX contracts in two nearby months, one call and one put just out of the money, and one of each, just in the money, for each of the two front months. Source: CBOE

Here you can see a sample page of September 2000 Premium Service. The Premium Monthly service is available for a monthly fee of $85.00 USD Order Page.

 Sincerely, Guy Cramer, President, United Dynamics Corp.

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