132% Annualized Return and the Next Great Market Call

“There is scarcely any part of my conduct which may not hereafter be drawn into precedent.” – George Washington

Most investors spend time thinking about, and conducting research on, similar investment environments historically as a gauge to understand what might happen in the current environment.  We’ve learned from experience that it matters, which is why we do it, but the question from many investors still persists, “Does historical precedence really matter?”

Readers of our weekly market call know that the theoretical underpinnings of our work in price trend analysis are based firmly on the fact that statistically it does matter, and that patterns and investor behavior repeat.  We’ve validated it, based literally on hundreds of millions of pattern searches and more recently simulations and a white paper which highlights the predictive nature of price trends.  So, let’s try and prove it to you as well without having to dig into the hundreds of millions of aforementioned back-test and simulation results.  In fact, similar to how our predictive analytics software makes identifying the historical precedence for patterns transparent and easy to incorporate, we will try and do the same quickly and accurately here.

Each week EidoSearch posts a Weekly Market Call to our website (www.eidosearch.com) projecting where an index, future, currency or stock is headed.  We hold ourselves accountable for the call and track the average return and accuracy and post those on the website as well.  Since we started posting these market calls to our website over five months ago, 8 of the calls have been on Commodities.  How have we done?  All 8 commodity calls have been correct, and the average annualized return is 132.67%.  Table of results below:

Should we expect the predictive nature of price trends to lead to results like this consistently over time?  Of course not.  However, we’re doing our best to prove through exhaustive simulations, and more easily through our weekly track-able market calls, that without a doubt there is value in understanding price trends and that it should be incorporated into the investment mosaic.  At a minimum, hopefully this gives us a bit more credence for this week’s Market Call.

In our attempt to go 9 for 9 in Commodities, we looked at the current price trends for all Futures contracts to identify the patterns where investors had reacted in a consistent manner historically.  We found an interesting projection for Platinum, taking the current one month price pattern.  Please review the charts below for the projection, and the range of historical outcomes:

Current one month price trend for Platinum (PL)

Chart of the 18 most similar historical instances of the current one month price trend in Platinum, and how each performed in the next 10 days historically dating back to 1994.  You’ll see that not only is the average return positive and that Platinum is up 72.2% of the time, but also that there is more upside than downside over the next 10 days historically.

Have a great week!