Earnings Warnings and Stock Performance vs. Ion Ratios
If you have followed SuperForce.com for some time you will know that increased positive ion ratios generally reflect increased stock markets, while increased negative ion ratios coincide with decreasing markets. Positive ions cause irrational behaviour (greed) and negative ions lead to level headed decisions (caution). SuperForce.com utilizes a licensed Algorithm to forecast these ion ratios in advance.
While negative ions are beneficial to us biologically they are not beneficial to the stock market mentality.
We have noted a number of overriding influences on our trading method based on the algorithm such as Solar Storms to Interest rate cuts.
How much of an effect do Earnings Warnings have on the market?
In December 2000 we sought to find this answer to see if there was indeed a connection between ions and the reaction to earnings warnings. We looked at 18 of the most popular stocks such as Intel, Microsoft, AMD, Bank of America, Chase Manhattan, Eastman Kodak, McDonald’s, GM…
It turns out that when the first day reaction to the warning was on a positive ion ratio day the stock averaged a –2.06% loss, when the first day reaction fell on a negative day the average loss was –4.47% loss, over twice the loss as that on a positive day! It seems to depend on the polarity and quantity of the ion ratios.
Our trading method used for our premium service, tries to hit the peaks and troughs by placing the trades in the middle of a series of continuous positive days or the middle of a series of negative ion ratio days. So our long orders (when we expect the market to go up is on about ˝ negative and ˝ positive days and our short orders (when we expect the market to go down) are also on ˝ negative and ˝ positive days. So we broke up the data into the first day reaction after earnings warnings on long orders and short orders.
This amounted to an average gain of 0.50% if the day after the warning was during our long order, and an average loss of –5.80% if we were in a short order.
When we look at those days where our long order coincided with a positive day we saw 3.57% increase. On Short order days that coincided with negative days the average loss was -1.72%.
When we reviewed our Long orders with negative ion days the average loss was -21.00% (*) and Short orders on positive days resulted in an average -11.93% loss. *This -21% loss may be an anomaly as only one company fell on this particular combination.
This confirmed that the method was in fact hitting closer to the expected peaks and troughs as well as the market reaction to earnings warnings connection with ion induced behaviour patterns.
What does this mean?
For starters, earnings warnings and reports can have some overriding effect on our trading method. Secondly, people will react differently to the same bad news if given on a day with a predominance of negative ions or a predominance of positive ions. Third, a company specifically targeting a positive day to issue a warning or report cannot guarantee that their stock may gain the following day, but there does appear to be a buffer to the losses that might be incurred if earnings warnings and reports are planned to coincide with favourable ion ratios and our SuperForce trading algorithm.
The current premium trading service cannot be used by a public company trying to utilize these results. It does not show the severity of the individual days and only forecasts a month ahead. Whereas with daily ratios, we can get much more detailed to forecast optimum earnings warnings issuance dates and we can also provide this data to public companies months ahead of time.
Issuing earnings warnings on unfavourable dates might not sound like allot but remember back to Nortel Networks Earnings report in October 2000. We actually issued an alert for that week (prior to the week) that we expected the markets to decrease more than normal, specifically we noted that Wednesday was the first time our algorithm had forecasted severe (increased) negative ion ratios since we started providing forecasts in Jan. 2000. Nortel came out on Tuesday after the close with unexpected earnings warnings. By the close of Wednesday Nortel had lost 25.55% share value in Canada and more than -27% on the U.S. markets. Most financial groups couldn’t understand this overreaction to Nortel’s earnings.
By the close Wednesday the market cap loss for Nortel in the U.S. was more than $50 billion USD and in the Canadian markets where Nortel made up 30% of the TSE 300 (Toronto Stock Exchange), the company Market Cap lost over $100 Billion dollars Canadian in just one day!
What would have happened to Nortel had they issued the earnings just four business days prior during increased positive ion ratios?
I recall discussing our alert to one of the lower executives who followed our system prior to this at Nortel on the Wednesday during the downturn, had we known the potential impact of issuing on the worst day for market behaviour in the year 2000 disaster may have been averted. This executive was laid off from Nortel a few months ago as the company never recovered from that warning.
Even we issued two more alerts in 2001 prior to markets losing value above the normal averages, providing evidence that we do indeed understand this correlation, it amazes me that no public company has ever asked or inquired for our services to provide them with optimum days for releasing future earnings warnings, earnings reports or news releases to minimize potential losses.
These severe negative ion ratios aren’t even worse case scenario, as there can also be extreme negative ion ratios. Picking favourable days to issue warnings or reports can be chosen with some intelligence behind it.
"He who does not learn from history is doomed to repeat it." (author unknown)
For Public Companies looking for information on our optimum earnings issuance days forecast (this is different than the Premium Service) please Email us.
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. With new alerts for overriding events. Order Page. Prepaid Discounts of up to 25% are also available.
Sincerely, Guy Cramer, President, United Dynamics Corp.
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