It has been another modeling marathon around here, all-day and all-night for the past week. We’ve been programming a decision-support system that incorporates trend/cycle regime change and adaptive filtering. Sounds less fun than it is.

The whole thing has left us with too little energy to explain it in great detail. Fortunately, the system itself is visual and fairly self-explanatory.

The exhibit below depicts the daily performance of the dozen global market sectors, as measured by the Dow Jones Wilshire index family. (You may click on the exhibit to enlarge it.) Each chart shows 10 November 2008 through the close of trading today.

Global Sectors with TrendMap (click to enlarge)

Each daily price is color-coded: green indicates a strong uptrend, dark green a weak uptrend. Red and dark red show the opposites. Bars colored gray indicate no clear trend is in progress, so avoid the sector altogether. Couldn’t be much simpler than that.

Below each price chart is a heat map, which we call TrendMap. The more green/red the map, the more bullish/bearish the trend.

In general, we would buy only when the TrendMap is bright green and short only when bright red. For best price, one might buy on a red bar in a green trend.

Of course, there’s no such thing as a Holy Grail in trading, and these days every trade is hard as hell. We developed this decision-support system to increase the probability of avoiding poor decisions.

Is it for sale? Everything has a price, but hocking “systems” online isn’t really our thing. Of course, vegetable farming isn’t really our thing, either… let’s see where the crisis takes us. ♦