Research Breakthrough: Macro & Micro States

Let's start with some definitions...

In the picture to the right, we see the Market States used in the Universal Method, which are indications of directional bias for an index symbol (like SPY).   We now will call these longer term measurements Macro States.  

Micro States are very short term technical measurements applied to an index symbol (like SPY)  to determine when it is optimal to take new Long or Short trades based on the probability of short term movement direction.

Mark began experimenting using Macro and Micro States together, resulting in a tremendous boost in performance.

Market States used in the Universal Method

Market States used in the Micro States method.

We can use these combinations to increase allocation to take advantage of the high probability of movement that can exist with certain combinations, like "Bull-Bull" or "Bear-Bear".  This is very similar to multiple time frame confirmation, since one state is longer term than the other.  Mark just posted the image shown to the right which illustrates the 9 combinations. 

For each combination we create a new Market State composed of the Micro and Macro States by "ANDing" the conditions together.  For example, if our Long Term Bullish condition is "C > EMA(C,200)" and our Short Term Bullish condition is "C > EMA(C,21) then we would write the combination as:

Bull-Bull Market State condition:
C > EMA(C,200)  AND  C > EMA(C,21)

These are not necessarily the formulas Mark is using, but it illustrates the idea.    By creating 9 Macro-Micro States, Mark has been able to achieve some fairly impressive results...

9 Combinations of Macro + Micro Market States.