No. of Recommendations: 2
Hi Jim : Hope this makes sense!
Here's the first look from a Robust CART run ( My dev data is always thru 2016 - so the 2020 and 2022 results are OOT)
CART Rules :
https://www.dropbox.com/scl/fi/v2vydeuiy6xpo7xhwei...The dataset is filtered using an overarching rule of Ensemble Estimate >=60%. My models are a bit shorter outcome window timeframe so this filters it down to about 250 candidate points - and as you can see only 16% (0.16) of them are Major Bottoms - eg in 2008-09 I only flag 3 days - 3/17 , 11/19-20 ( Bottoms on many major indices - Tech/Intl etc) and 3/6-3/9. Similarly only 3 periods in 2000-01 - 3/21/01 ,right after 9/11 , 10/10/02 and 3/12/03 etc.
So the requirement is very high bar
Greener the cells - more accurate the rule % age wise.
Key inferences
(1) It splits on the 10Yr as primary : And its major buying of the Treasuries - in the charts below its the Red dot circle. Its actually not surprising!
(2) Next levels are my OTHER models - I am pleased it ignored the filtering one subsequently
(3) But on the USD $ : Its requiring a Sell-off condition ( Its the Pink bar in the bottom ribbon of the charts). Since the data is filtered - when you look at all days in entirety - the buy conditions pink actually follows a degree of volatility in the $ itself ( Green/Blue ribbon bars)
So - Net : Extreme Breadth ( I did put the H/Ls as their independent columns - they were not picked - since they are already incorporated into the models) with either Treasuries being bought (best) or a decent $ Sell off ( medium)
Here are 3 period pics:
https://www.dropbox.com/scl/fi/ni4c40kuqygxucfas5c...https://www.dropbox.com/scl/fi/zhg28bmhkkibmj8iekw...https://www.dropbox.com/scl/fi/xlxbbyn26fb71hke72a...Note : Covid and 2021-22 are Out-of-time and OOS for the rules.
Also given that rates are a constricted function - its easy to reach the % age volatility thresholds in lower values like in COVID(ZIRP). So the White triangle is an absolute value Bps move. I think the combination works better. Like you take the Max of the 2
I think Gold volatility is almost a given hence it didnt get picked up. Incorporating these into the models is a fairly heavy lift - because it will involve full re-estimation and validation.
Best
AC
