The Inertia Model (Oil)
Here are the 10,20,30,40,50 & 60 tick projections based on my "Inertia Model" (Subject to being updated as price develops - Historically the further out the prediction is, the less accurate it will tend to be)
NOT ADVICE - JUST SHARING MY NEW STRATEGY FOR CATEGORISING THE MARKET INTO PHASES FOR MY QUANT STRATEGIES
Current Inertia Level of market: -2.404 (Bearish - Transition) - Additional Notes: Current market phase is in transition meaning it is not a fully realized phase. Transition phase projections outside of 10 ticks can often have an error % larger than 2 standard deviation.
Inertia Level Key:
Hyper Bullish (HyBu) = 3 & >
Bullish (Bu) = 0.8 - 2.99
Low Bull Momentum (LBu) = 0.45-0.79
Ranging (R) = 0 - 0.44 & (0.44)
Low Bear Momentum (LBe) = (0.45)-(0.79)
Bearish (Be) = (0.8) - (2.99)
Hyper Bearish (HyBe) = (3) & <
The 3 major concepts I tried to incorporate in the Inertia model -
Fundamental stimuli exchanges into psychological energy: Like a bat hitting a ball, where the bat velocity is the fundamental element, and the ball’s reaction to being hit, is human interpretation. But with one key difference, the ball will completely obey the fundamentals, where human psychology will overvalue or undervalue the fundamentals. It will overvalue due to forward pricing and speculation, and undervalue due to misinterpretation of the fundamental effect.
“The elastic band theory” - Fair value & price discovery: Once price has been set in motion by a fundamental force we enter a period of price discovery as the markets search for fair value. In this scenario there are two forces: 1) Current Fundamental Value and 2) Forward-Priced Value. Current fundamental value tends to lag behind forward-prices value. Imagine they are both attached to either end of an elastic band. When they are close to each other, there is little tension and price can move freely with little resistance; when they diverge or forward-priced value runs too far ahead of Current fundamental value, tension builds and one of a few scenarios must play out.
1) Forward-priced value must return to real current value (A correction)
2) Forward-priced value can range while real current value catches up (A consolidation)
3) A Snap pricing event: A snap pricing event is similar to an elastic band snapping. The snapping always occurs at the forward-priced value and results in a whip-saw pricing effect. Here the price very quickly slings to the current fundamental value, and will move significantly below/above (depending on the circumstance) the current fundamental value. From here price will whip around and consolidate around the current fundamental value before returning to a less volatile price discovery mechanism. A snap pricing event is caused by many things, here are a few examples: Euphoric exuberance, price manipulation, Extreme undervaluation of the fundamentals and transient events (otherwise known as black swan events).
Inertia Degradation: The longer price trends; following the initial inertia level’s phase, the more likely it is to go into a major correction or consolidation. Like throwing a ball up as high as you can, eventually that energy will be nulled by gravity.
NOT ADVICE - JUST SHARING MY NEW STRATEGY FOR CATEGORISING THE MARKET INTO PHASES FOR MY QUANT STRATEGIES
Current Inertia Level of market: -2.404 (Bearish - Transition) - Additional Notes: Current market phase is in transition meaning it is not a fully realized phase. Transition phase projections outside of 10 ticks can often have an error % larger than 2 standard deviation.
Inertia Level Key:
Hyper Bullish (HyBu) = 3 & >
Bullish (Bu) = 0.8 - 2.99
Low Bull Momentum (LBu) = 0.45-0.79
Ranging (R) = 0 - 0.44 & (0.44)
Low Bear Momentum (LBe) = (0.45)-(0.79)
Bearish (Be) = (0.8) - (2.99)
Hyper Bearish (HyBe) = (3) & <
The 3 major concepts I tried to incorporate in the Inertia model -
Fundamental stimuli exchanges into psychological energy: Like a bat hitting a ball, where the bat velocity is the fundamental element, and the ball’s reaction to being hit, is human interpretation. But with one key difference, the ball will completely obey the fundamentals, where human psychology will overvalue or undervalue the fundamentals. It will overvalue due to forward pricing and speculation, and undervalue due to misinterpretation of the fundamental effect.
“The elastic band theory” - Fair value & price discovery: Once price has been set in motion by a fundamental force we enter a period of price discovery as the markets search for fair value. In this scenario there are two forces: 1) Current Fundamental Value and 2) Forward-Priced Value. Current fundamental value tends to lag behind forward-prices value. Imagine they are both attached to either end of an elastic band. When they are close to each other, there is little tension and price can move freely with little resistance; when they diverge or forward-priced value runs too far ahead of Current fundamental value, tension builds and one of a few scenarios must play out.
1) Forward-priced value must return to real current value (A correction)
2) Forward-priced value can range while real current value catches up (A consolidation)
3) A Snap pricing event: A snap pricing event is similar to an elastic band snapping. The snapping always occurs at the forward-priced value and results in a whip-saw pricing effect. Here the price very quickly slings to the current fundamental value, and will move significantly below/above (depending on the circumstance) the current fundamental value. From here price will whip around and consolidate around the current fundamental value before returning to a less volatile price discovery mechanism. A snap pricing event is caused by many things, here are a few examples: Euphoric exuberance, price manipulation, Extreme undervaluation of the fundamentals and transient events (otherwise known as black swan events).
Inertia Degradation: The longer price trends; following the initial inertia level’s phase, the more likely it is to go into a major correction or consolidation. Like throwing a ball up as high as you can, eventually that energy will be nulled by gravity.
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