A Budding Romance: Finance and AI

THE Best Trade idea This Week

"Hello Pete Mitchell. I heard the best of the best were going to be back here."

-Charlie, Top Gun

Here is EidoSearch’s best of the best trade idea for the week that even Tom Cruise would be proud of. How did we select it?

We screened through 5,500 US Equities and ADR’s, looking at 1 month trading patterns and doing literally billions of pattern comparisons to see what stocks have the strongest return probabilities in the next 5 days. And the winner is?

Crude Oil in 1 Year?

"The four most expensive words in the English language are ‘This time it’s different'"

-Sir John Templeton

Here we go again with Crude testing lows. We’re a buck or so away from the price bottom seen a couple of times in Q1, and prior to that during the Financial Crisis. In late June we had risen back above $60 a barrel and the discussion at the time was about the all-time great investment opportunities in the sector. Now we’re back to questioning sustainability for debt ridden U.S. drillers and getting anxious about what impact this will have on the U.S. and Global economies.

How will Social Media Stocks Trade Post-Earnings (FB, LNKD, TWTR)?

"In a world that’s changing really quickly, the only strategy that is guaranteed to fail is not taking risks."

-Mark Zuckerberg

To say that the big social media stocks did not fare well last week after reporting earnings is an understatement. Facebook was down a comparatively mild 4%, but both Twitter and LinkedIn were down a whopping 20% over just a few days. How are they likely to trade from here?

1 Month Outlook for Metals

"Gold gets dug out of a ground. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head. "

-Warren Buffet

Metals are off big time from highs reached about four years ago. The last 3 months in particular have seen steady declines in prices.

To generate probabilities on what the next 1 month looks like, EidoSearch looked at the current 3 month price trends in Gold as well as a broader All Metals Index from Morningstar.

Big Data: The Future Is Now

Big data is also changing the world of analytics for manufacturers and financial services firms. David Kedmey, president and co-founder of EidoSearch, a numeric search engine for data, explains: “Big data has changed analytics and predictive models immensely because of the variety and the quantity of data available.”

From Predictive to Productive: Practical Applications of Analytics

A case in point is predictive analytics, such as those of Boston-based EidoSearch, which scans historical data for patterns that match current events.

Precedence for a Further Drop in Gold

"The desire of gold is not for gold. It is for the means of freedom and benefit. "

-Ralph Waldo Emerson

Gold prices continue to decline, and the sell-off is accelerating. China appears to be slowing down its purchasing and there was a big sell off today leading to a sharp decline and hitting price levels not seen in 5 years. This on top of the fact that the dollar is strengthening and the Fed is expected to start raising rates by end of year, and you have an environment where pressure on prices seems destined to persist.

How much further could prices drop? Are we nearing a bottom?

A Gauge for the Financial Bellwether’s This Week

"Any jerk can have short-term earnings. You squeeze, squeeze, squeeze, and the company sinks five years later."

-Jack Welch

We look at the trading patterns of these stocks going into the earnings event, and look for similar patterns in a peer group that were going into earnings historically to get the range of probable outcomes. There’s information contained in the patterns that effects the size of moves post release, and is valuable information that investors can incorporate in their process going into and coming out of the announcement.

Molson Coors is Oversold According to the Stats

"Cause, baby, you’re a firework. C’mon show ‘em what you’re worth."

-Katy Perry

Molson Coors (A Shares) has had a rough 2015. Shares are down about 30% so far this year in the face of weakening demand and sales in key markets, while the Morningstar Consumer Defensive Index is up about 1% for the year. We analyzed their current price pattern in three ways, looking for similar matches historically within the Sector (Consumer Defensive), Industry (Beverages/Brewers) and in their own history.

A Gauge for the Pull-Back in China

"Once bitten by a snake, one is scared all his life at the mere sight of a rope"

-Chinese Proverb

The Shanghai SE Composite Index had been on an epic tear through mid-June, running up over 150% in less than a year. Irrational Exuberance? In just the last two weeks of trading, the SSE has given up more than 20% of those gains and the sell-off is accelerating. Want an objective view on how far it might fall?

The Fed has once again pushed back expectations for a rate hike until later this year, and the markets have once again rallied. Last week the Nasdaq eclipsed its 15 year high from the dot com days (scary) and investors are ever concerned about valuations. Most developed European markets have been terrific this year, but have begun stalling with the ongoing Greek debt issues and have been increasingly volatile.

The yield on the 10 Year Treasury finally hit bottom and a two year low in early February of this year. Since that time, with expectations of the Fed’s impending rate hike, it’s been rising steadily. In these environments, so it goes, investors rotate out of sectors like Utilities where the dividends start becoming less appealing, and out of assets like Gold that provide no yield, and into Financials and Insurers that directly profit from higher rates.

For our weekly market calls, we typically provide fundamental or news based context around our statistics. This morning, we’re going to let the percentages do the talking and let investors put them into the proper context.