You can follow the blog at ​https://backtest.substack.com

Thanks,

Dave

Going forward I am going to post the blog posts exclusively over at Substack. The image capabilities with the Weebly editor are cumbersome. In tonight's post the image showing all the historical trades is cutoff (there are way more matches). Anyway, use the substack link.

You can check the blog for free at: ​https://backtest.substack.com

The short term gauges are leaning solidly bullish and honestly, that caught me off guard. I went back and reviewed the historically matched SPY dates, expecting a few outliers to skew the signal. Sure enough, February and March 1999 had some monster gains, but even without those, the remaining matches held their own.

3-Day Signal Snapshot

This one stood out, so here’s the breakdown:

• 74.07% win rate (20 out of 27 matches)
• Average winner: +1.85%
• Average loser: –1.52%

Below are the historically matching days.

It was a rough day across the board, driven by growing uncertainty around the Fed’s rate cut trajectory and delays in key economic data due to the shutdown. Normally, a strong down day nudges at least one of the gauges into the green—especially the longer-term ones like the 3- or 5-day. Not this time.

• 2 Day Rating: 0.13 — Signaling a balance between bearish and bullish historical matches
  
• 3 Day Rating: 2.86 — Leaning to the positive side based on the historical matches, but not a sweet spot yet
  
• 5 Day Rating: 3.02 — Slight upside bias but nothing to write home about
  

The breadth weakness under the surface is tricking the algo into thinking we’re deeper in the hole than we actually are. That disconnect is worth watching. Friday could be pivotal.
Rest up, tomorrow’s setup may bring some clarity.

Have a Great Night!

DJ

As this upward leg runs into some resistance, the forecast gauges have eased back toward levels typical for this historical regime. Today’s readings 0.38 (2-day), 0.71 (3-day), and 0.84 (5-day), suggest a return to baseline. Nothing stands out as actionable. We’ll need a stronger push in either direction to get the gauges leaning decisively red or green again.

After the reversal on Friday and the gap and run today we have taken some of the potential upside out already. Digging in to the 3 day holding period I am seeing 56% of trades winners and the average winner is 1.19% and the average loser is -0.96%. This is reflected in our slight lean to the bullish side.

This evening I published a study on the CNN Fear Greed Index regimes and various holding periods in those regimes. It's pretty cool and I'd recommend you check it out over on my Substack.

Have a Great Night!

DJ

This article was published on my Substack. It is a great insight in to the CNN Fear Greed Index. You can read it for free here. I find the blog publisher here on my site a bit cumbersome versus the Substack platform. Feel free to subscribe over there.

Have a Great Night!

​DJ

I don't have much to add to the commentary from Thursday evening. The forward profile looks very similar. We got the reversal off the panic low Friday. Obviously lot's of news flow. Blah blah blah. 

Keep an eye out tomorrow for a study I recently ran that delves in to the CNN Fear Greed Index and the forward returns in various deciles. I think you'll find the results quite intriguing ;)

Have a Great Night!

DJ

Historical market days that resemble our current conditions have typically led to forward strength. Based on the 3-day and 5-day ratings, we’re seeing a strong push into the green, indicating that the matched historical scenarios generally had a bullish bias.

Take the 3 day holding period as an example:

• 23 historical matches were found
• 73.91% of those ended positively
• Average gain was 1.6%, while the average loss was 1.89%

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From these figures, we calculate the Profit Factor, which compares the total gains from winning trades to the total losses from losing trades. In this case, the Profit Factor is 2.35, meaning the "pile" of money from winners was 2.35 times larger than the "pile" from losers. Profit Factor is one statistical measure of a strategy or a portfolio.
As a system developer who has analyzed billions and billions of historical price bars (open, high, low, close, volume), across every timeframe from sub minute to daily and above, and across stocks, commodities, and futures, I’ve noticed a recurring flaw in many traders: they don’t think in probabilities. Worse, they often don’t know how to combine those probabilities into a coherent framework. 
This is the core insight I want readers to grasp for now: A strong green signal doesn’t guarantee the market will move up. It means that, relative to an average day in a similar market regime, the odds are skewed more favorably toward the upside. It’s about leaning into statistical edges, not certainties.

Think in probabilities. Size in probabilities.

Over time, these discussions will uncover specific trading edges and strategic insights. We'll also explore how to integrate a diverse set of systems into a unified, resilient portfolio, one that's built for durability across market conditions.
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Have a Great Night!

DJ

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