Yesterday Dow down 140+. This morning futures down big. To be expected with current news. Market will absorb it and behave within expected volatility parameters; system is not critical and will not "crash" at this point.
I repeat, remember the ABC's that I mentioned earlier. A rigorous application of traditional deep value metrics is, and will be the way to go.
Clarification: Nobody will ever be able to say with certainty that a complex dynamic system will have a six sigma or larger event in a specific time period; the best one can do is understand if the system has reached a point of "self organized criticality" and is then susceptible to a large event. The latter in of itself is of great value as you can hedge, and in parallel the system has reached a point of diminishing returns and decisions regarding asset allocation can be made more effective.
Worlds first successful application of Complexity Theory to A Market. 2005 Paper: "Stock Market Endogenous Dynamic, 'Noise' and Crash Precursors". Unpublished. Its purpose was to apply SOC/Complexity theory in real time and see if it was possible to identify Crash Precursors to Six Sigma Volatility Events in the S&P 500. Successfully identified Crash Precursors prior to 2008 and 2020 Crashes, . PLEASE READ FIRST ENTRY 8/22/2005 FOR CONTEXT. NOT ADVICE.
Friday, May 12, 2006
Short Term Volatility within expected bounds
For context read first entry: "STOCK MARKET ENDOGENOUS DYNAMIC" 8/22/05 @ WWW.ALPHAADDER.BLOGSPOT.COM
Disclaimer: Comments are opinion; specific to systemic risk management, and are not investment advice.
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