ITRAC FAQ

 

What is ITRAC’s S&P 500 Index Forecaster?

 

ITRAC’s S&P 500 Index Forecaster gives a one day look-ahead forecast of the Standard and Poor’s 500, an American stock market index, one of the most commonly followed equity indices. It is a tool that allows you to more accurately control the timing of your investments.

 

 

Why just one-day look ahead?

 

Our research has shown that one day forecast periods for the S&P500 are potentially the most useful. Things happen fast in the stock market, and very large draw-downs can occur in just a week or less. As an example, accurate forecasts can be made for hurricanes one or two days out, but weather forecasters throw their hands up when asked about it a week or two out. The same holds true for the S&P 500. Being aware of likely short term direction is a huge advantage for investors.

 

How is it used?

 

There are many uses for ITRAC’s S&P 500 Index Forecaster, and a few are given here:

 

1) The information provided by the forecast can be used to help avoid market drawdowns, protecting assets like 401k retirement plans, portfolio stock holdings, etc. ITRAC's historical positions(forecasts) are available in excel format here: spreadsheet so you can run your own analyses on drawdowns, optimal allocation amounts, risk, etc.

 

2) The information can be used to augment investment returns. For example, a portion of your holdings could be allocated to an exchange traded fund (ETF), such as a Standard & Poor's Depository Receipt (SPDR) or the iShares S&P 500 Index, both of which are securities that track the index but trade just like a stock. Both index funds and ETFs provide cost-efficient ways for individual investors to participate in the diversity and liquidity of the S&P 500 Index. Modulating your position size in these funds based on ITRAC’s forecast could improve your overall investment performance.

 

3) Stock or index options traders could make better informed decisions about exercising stock options, or improve their timing on buying or selling puts or calls.

 

4) Futures trades can use the forecast to assist trading E-mini’s, or S&P futures contracts or to hedge an existing portfolio.

 

5) Institutional Traders, Portfolio Managers and Hedge Fund Managers might improve their performance on metrics such as the Sharpe ratio, Sortino Ratio, etc.

 

 

 

What is the “FREE” ITRAC S&P 500 Index Forecast?

 

The free Forecast allows you to follow, in real time, the accuracy of the forecast at no charge. Over the long run, it has a 70% accuracy. (70% of the time when it says “long”, the index closes higher the next day).  That is a very simple but limited performance metric. It says nothing about its ability to avoid drawdowns, volatility, etc. Those metrics are available on the forecast page itself. We encourage you to look at them. The free forecast can generate public interest by demonstrating, over time, the effectiveness of the software. We’d like to demonstrate that the old adage: “You can’t time the market, so don’t even try” is false and misleading.

 

 

What is the “Subscription” ITRAC S&P 500 Index Forecast?

 

ITRAC supplies two S&P500 Index Forecast products. One is completely free, but has a shorter real-time track record. The subscription forecast has been proven and traded in real-time for years beyound the out-of-sample data testing, and is very reliable. The paid subscriber receives a curent forecast, made after the close of the market each traded day. It indicates the likelyhood (on a scale of 0 to 10) of the next (future) closing price being higher than today's closing price. It has been traded and proven in real-time for multiple years.

 

 

How are the Forecasts made?

 

ITRAC uses state-of –the-art software, developed by engineers, mathematicians, statisticians, and programmers. It is written in the C programming language, and was improved and tested over many years of actual use by large international banks and domestic financial institutions. The software learns statistically relevant (high confidence interval) patterns from past market behaviors. Myriad simulation parameters are tuned with the help of Evolutionary Programming tools. Rigorous statistical validation techniques are used to verify the results, including n-fold cross validation, jackknife resampling, double blind hold out data sets, and real time monitoring. The software is highly sophisticated and as accurate as is currently possible over the long run putting the odds significantly in your favor.

 

 

What is a "BIG POINT"?

 

A Big Point is one point movement in the index, without any fractional or decimal parts. For example, if the S&P 500 index value moved from 2100.50 to 2101.50, that would be an increase of "one Big Point". Similarly, if it moved from 2120.25 to 2110.25, that would be a loss of 10 "Big Points".The Big Point value is the dollar value represented by a full point of price movement. In the case of stocks, the Big Point Value is usually 1, in that 1 point of movement represents 1 dollar. However it may vary. For example, the Big Point value for the S&P Futures contract is 250, where 1 point of price movement represents 250 dollars. Also, the Big Point Value for the CME E-mini contract is 50, where one point of the index movement represents 50 dollars. In the SPY ETF, a Big Point movement represents one dollar.