Greedometer & mini-G videos
How to use the mini Greedometer:
- A time series of weekly mini Greedometer values are plotted (the mini Greedometer sequence line in red on the charts). None of the mini Greedometer algorithm input parameters are S&P500 (SPX) price.
- A mini Greedometer sequence is contained by a topline and baseline. They form a downward sloping funnel. Depending on the pace of collapse, it will take 3-6 months to begin to define the baseline and topline.
- A SPX crash initiates where the mini Greedometer topline is seen. This is associated with the SPX re-testing its previous weekly close peak within 1.5% at the end of a sucker rally.
- The pace of SPX collapse is directly related to the slope of the mini Greedometer baseline.
- Each successive mini Greedometer sequence drop and rise is smaller as we move through the funnel. Each successive corresponding SPX drop is larger, and each successive SPX bounce is smaller.
- A SPX crash end would be located near where the funnel ends –provided nothing new is done by central banks to stop the crash (has not happened in the past 18 year, but at some point they’ll run out of tricks and/or credibility).
- When mini Greedometer values reach the baseline, the SPX stops dropping, then starts climbing (a bullish SPX inversion location in time).
- When mini Greedometer values reach the topline, the SPX stops climbing, then rolls over and begins dropping (bearish SPX inversion location).
- When no central banks and no fiscal gimmicks occur, the topline and baseline don’t move (and are therefore most reliable and valuable).
- When the Fed changes its plans (both expansionary as well as contractionary), this warps the baseline, materially changing the pace of the SPX collapse. It takes a couple weeks for the mini Greedometer to bake that change in. Therefore the mini Greedometer is a mechanism for determining effectiveness for Fed (& other central bank) surprise intrusions — in so far as their action will sustain a risk-on rally and delay an economic collapse.
- It should not be lost on the reader that for many years the Fed has always gone out of its way to avoid surprising markets, yet it repeatedly has endeavored to surprise markets with more myopic policy intrusions over the past few years. The same is true for the other major central banks. Good news (more central bank sugar bombs) is best delivered as a surprise.
- When the ECB, BoJ, PBoC (non-Fed central bank) make small plan changes (small surprises), their actions cause short term reactions to the SPX and the mini Greedometer. Short term reactions cause the topline to be warped steeper without impacting the baseline, therefore no material change to the end point of the sequence/crash.
- The mini Greedometer was designed to capture risk metrics associated with the S&P500 and U.S. economy. So Fed policy changes are more obvious than those from non-Fed central banks.
- A large change in plans from non-Fed central banks (ECB, BoJ, PBoC) will truncate the sequence.
- A given mini Greedometer sequence is likely to have a baseline very similar to the one before it unless there is a major policy change from the Fed. This represents the fact that very little has changed in terms of underlying threat conditions.
- The time between sequences has obeyed an exponential decay over the past 17 years of Greedometer data. The first inter-sequence time gap was 183 weeks -from the end of the sequence associated with the 2000-2003 crash to the initiation of the sequence that was associated with the 2007-2009 crash. That has steadily dropped to the point where it is now 0.
This video has the mini Greedometer with the SPX during the 2007-2009 stock market crash. The mini Greedometer did a decent job at identifying SPX inversion points, but the algorithm was tweaked afterwards to improve performance and better refine the SPX inversion locations (as you’ll see in the videos that follow).
This video shows Greedometer and mini Greedometer sequence 7 with the SPX. Notice the baseline is formed assuming QE3 lives forever. It then is warped downwards by the Fed announcing QE3 taper. This change in reality –QE3 won’t go on forever but will begin being tapered soon– causes a steeper mini Greedometer sequence baseline.
This video shows the Greedometer / mini Greedometer 8 sequence and SPX. Notice how well the baseline and topline are respected — they identified SPX inversion points until the Bundesbank surprised everyone in March 2013 with a blessing of ECB QE. This news materially changed the risk profile to the S&P500 and global stock markets. With the ECB piling on nonstop, the sequence was truncated. To then initiate Greedometer 9 with a 1 week gap (obeying the 17 years exponential decay between sequences).
This video shows the Greedometer / mini Greedometer 9 sequence and SPX. Notice how well the baseline and topline are obeyed — until the BoJ did a surprise spiking of the global riks punch bowl on October 30th 2014 — the day AFTER I declared at the Nasdaq market center that the SPX was within 1 week and 1% of initiating a crash –unless stopped by more central bank candy. The PBoC and ECB piled on with more threats and actions. Notice the impact these actions had on the sequence — it created successively steeper toplines until the ECB finally caved and launched QE in January 2015.