Omega Metrics® Bubble Trading Strategy
The presence and extent of overheating in markets has been identified by Omega Analysis’ risk measurement technology.
Our Unstable Expansion indicators provide price levels which, historically, have produced reliable profits for short positions during market downturns. Predicted Correction levels now vary from 13% to 72%.
The trading strategy is to maintain risk-controlled short positions in a portfolio of ETFs until the expected Correction Level is attained or the Trend Indicators for the S&P 500 indicate that a rebound is underway. As the shorts are exited the proceeds can be held in cash or Treasuries until a rebound signal for the U.S. market is received.
In addition, some ETFs may enter ‘Unstable Contraction’ mode after the Correction Level is attained. In this case further short positions would be held until a rebound signal is received.
Trading the Rebound In every previous major downturn in the S&P 500 Index and its precursors, our Rebound Indicator has been a reliable signal of the next ‘Value’ period in the US equity market. This will be used as a trigger for the resumption of long positions across asset classes and sectors.