I had the pleasure of attending a webinar on June 13th by AlgoDynamix. The management team are physicists who met at Cambridge University. Instead of using historic return data, like I do, they look at behavioral characteristics of clusters they develop from a limit order book, as shown below:
I remember back when I was an allied member of the NYSE, it was believed if one could get a peek at the specialist’s books, one would be able to determine which way the market was going. Perhaps AlgoDynamix is getting that peek with an insight into their behavior.
I believe this could be a major improvement over the methodology I developed. While my February 6th posting warned against having more than 40% in equities, AlgoDynamix raised a red flag for a downturn in the market, which occurred in April, with a subsequent flag indicating an end to the downturn. In the past year that I have been observing their flags for ups, downs and endings, their methodology appears to have had predictive powers worth looking into.