What is the Toggle Leading Indicator?
Since TOGGLE was generating a number of individual insights for global assets every day, we were curious to see if aggregating these insights provided any understanding of potential price action in the overall market.
Guess we were right.
Our analysis of the indicator showed that the TLI led the S&P 500 by 12 trading days, with a 50% forward-looking correlation and a historical hit rate of 86%.
Below, the first chart shows the TLI shifted 12 days overlayed with the performance of the S&P 500. As you can see, there is a clear correlation between the two.
The other charts show the forward performance of the indicator, specifically the Granger Correlation chart on the right. This chart shows a significant 50% forward correlation across the entire domain (i.e. including non critical periods).
We have identified that at key thresholds of +/- 0.15, the TLI has had an 86% hit rate and a forward correlation to the S&P 500 of 62% (which in mathematical terms, can be considered as strong).
More information about the inputs of the indicator and analysis of the thresholds, can be found in the next few articles.