Last updated Apr 21 2023
We love leading indicators, and we know you love them too. Today we introduce our Peak Probability Index. The index is a probabilistic gauge of how close we could be to a peak in the broad market.
A peak is the highest point of the index’s local trading range, and would suggest prices might need to cool down before seeing any further rally. Don’t forget, peaks can be readjusted if news, technicals or fundamentals suggest otherwise.
We have observed that when this indicator crosses 95, the probability that we could be at a peak in the market becomes statistically significant - and thus investors should watch out for downside. The index has proven to be successful, with a holding period of 8-10 trading days.
The index is built on a risk-adjusted and time-adjusted calculation of the size of the recent market moves, and how the S&P typically reacts after trending upwards for a certain period of time.