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What is going on in London?

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November 20, 2012 – Comments (9)

I am hopeing some people might shed some insite to this, but I am showing a lot of indications that the market is linked to London. The problem is I have no understanding of Europan Markets and do not know how to interprit this data.

 

A refresher to what I am doing here so you might understand. I am using the Z200 as an index. I need to know when the index falls just as much as when it rises, so I am not trrying to gain some super high score here on The Fool. Originally this was a method I used to rate stocks many years ago. It was a cumbersom project and would take many hours. Eventually I stripped out what was overcumbersom, automated it, and eventually added a few basic artificial intelence routines. So basically I give it a list of stocks I own, and a list of stocks I might be interested in. It then goes out on its own and picks stocks it might find interesting without any aid from me. It takes the list of stocks it has een tracking, adds the other lists, does the report, and kicks out of the list what does not meet the bar. So the program decides all these things, not I. I get two reports out of the program. The first reportis kind of a moving averageof the past years worth of reports, which I post here as the Z200. The second report is the weekly report without any anual history.

 

So for the past few months the weekly report is being taken over by stocks from the London Stock exchange. But the odd thing is the anual report which is still primarily American stocks, has been mimicing the movements of the London Stock Exchange for the past year. Granted on The Fool it only shows the past few months, bu from memory I look at the anual chart of the LSE and it looks exactly like the chart for The Fool over the past year.

 

Can someone shed some light on this?

9 Comments – Post Your Own

#1) On November 20, 2012 at 1:27 PM, anchak (99.87) wrote:

First I thought this was a joke -- now reading and re-reading it -- looks like you may have a genuine question.

I looked thru your picks - and there's no obvious trend - which means - you need to look into your black-box and the similarity metric you have defined for it to make picks.

If you can post that here - well then one could analyze.

 

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#2) On November 20, 2012 at 1:43 PM, Mega (99.96) wrote:

"I am not trying to gain some super high score here on The Fool."

You are aiming for a modest score? Mission accomplished!

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#3) On November 20, 2012 at 2:19 PM, anchak (99.87) wrote:

"You are aiming for a modest score? Mission accomplished!"

 No I think you missed his point -- what he's trying to say is that he tracks 200 stocks as an Index - which is input fodder for his black-box system -- thus his point is by definition - it shouldn't beat SPY at all - and only mimick SPY

 

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#4) On November 20, 2012 at 3:49 PM, Mega (99.96) wrote:

Anchak, I think the 200 stocks are the output of his black box, not the input.

I'd guess his data source made a change that made more UK listings show up in his list. Not anything significant in the market.

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#5) On November 20, 2012 at 3:58 PM, Mega (99.96) wrote:

I also suspect that the high perceived similarity of his selected US stocks to the UK market (as opposed to the US market) is completely random. The brain is programmed to look for patterns, even when they don't exist.

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#6) On November 20, 2012 at 4:09 PM, anchak (99.87) wrote:

Mega....we are all talking hypothetical here without knowing actually what the system does and I don't think or didn't find the initial post to be coherent -- however -- there's one very very odd thing vis-a-vis the US Indices and the FTSE100 --- its very low weighted to Technology - and the names there ( other than like Vodafone and a few others)  are not international biggies.

Hence if he has a quant system - which does a relative play on momentum and "CHOOSES" the index /market first - and THEN picks stocks from constituents - there's a rational reason for it to veer to the LSE.

I don't need to say why - just look at the COMPQ /NDX in the last 2 months

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#7) On November 20, 2012 at 4:27 PM, Mega (99.96) wrote:

The FTSE is up about 2.5% more than the S&P over the last 6 months, while his score is flat. So his black box doesn't seem to be tracking UK alpha.

The FTSE outperformed the S&P 500 in late May and late October, underperforming in late August. Those line up a little bit with his score, doesn't look significant to me.

You may be right that his model has a tendency to overweight sectors represented in the FTSE, or stocks with a similar beta to the FTSE (seems to have been a bit lower than the S&P 500).

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#8) On November 20, 2012 at 4:41 PM, Mega (99.96) wrote:

Well actually, calling the 2.5% difference "UK alpha" is a bit silly. I just mean outperformance.

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#9) On November 26, 2012 at 1:42 PM, Z200 (62.69) wrote:

"You are aiming for a modest score? Mission accomplished!"

 No, as with any other index when the score is low then it is in the time to buy. When the score is high then it is in the time to hold and or sell.

 "Anchak, I think the 200 stocks are the output of his black box, not the input."

 That is correct. The output is trying to screen stocks for being undervalued. Like a good company that has had recent trouble and will hopefully recover.

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