I beg your pardon

S2N spotlight

Equity markets sold off strongly on Friday.

I was thinking over the weekend about how making the 3 major US stock indices into a consensus indicator would perform.

Thesis for the chart that follows: when all 3 indices (S&P 500, Dow Jones Industrial, and Nasdaq Composite) are above their 200-day moving average, mark it green with an up arrow. When all 3 are below their 200-day moving average, mark it red with a down arrow.

When looking at the chart with the naked eye, going back to 2007, it looks like an amazing indicator?

Not so fast. I purposely used big green and red arrow markers, which make the consensus indicator look unbelievably accurate. If you were paying attention to my rules, you would realise there needs to be a 3rd phase, as what should be done when there isn’t consensus, i.e., 2 indices might be below their 200-day but the 3rd isn’t?

I have created a backtest that goes to cash whenever there is no consensus amongst the 3 indices. I should also add the consensus indicator is being used to decide when to invest or not in the S&P 500.

It turns out to be a horrible indicator for investing in the S&P 500 since 1990. I was really hoping to share with you guys today that based on the current sell signal from all 3 indices, we should all be going short based on past history. There is no evidence to support this from my backtest. [This doesn’t mean I am not short or dont think you should be; it just means this method cannot support being short, if you wish to beat the index.]

S2N observations

I know President Trump is pissed with Putin over the latest strings attached counter peace proposal. However, I am pissed with the president.

On the 10th of September 2020, Hindenburg Research, a financial research firm known for short-selling, detailed a report accusing Nikola and its founder, Trevor Milton, of engaging in deceptive practices to mislead investors about the company’s technology and capabilities. Hindenburg have an incredible track record, and credit to Nate Anderson for hanging up his boots at the top of his game.

I am not going to go into all the details of what Nikola did. In case you were wondering about the name. Nikola Tesla was a Serbian-American engineer, futurist, and inventor.

The Nikola company was all about hydrogen-powered trucks. I read the Hindenburg report about the scam and was mesmerised. I then listened to the brilliant podcast series produced by the Wall Street Journal called Bad Bets. I truly felt invested in this story even though I never had a cent involved.

Trevor Milton is a scumbag who was sentenced to prison and ordered to pay a $125 million fine. Before his downfall he was a swashbuckling billionaire who could talk the hind leg off a donkey.

Back to why I am so pissed off. On Friday I saw Trevor Milton posting a social media video of him thanking President Trump for granting him a full pardon and receiving a personal phone call from Trump. I shouldn’t care so much, but it really seems like a travesty of justice and something the president did not need to get involved in, let alone make a personal call.

S2N screener alert

Google dropped more than 4.90% and -2.80 standard deviations for only the 52nd time in its history.

The Chilean Peso had a strong move lower, -2.50 sigma. I have no knowledge of the Chilean markets.

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