Landon Phillips 12/13/25 Landon Phillips 12/13/25

Wave-State Equity Model Proves Worthy, Remains Defensive-Long

Last week I introduced the Wave-State Equity Market Model, and I appreciate the thoughtful feedback many of you shared.

One point of clarification is worth emphasizing: the portfolio is an “always-long” portfolio. We are always invested in the market. The reasoning is straightforward—precise market timing is extremely difficult, and holding cash for extended periods can result in missing substantial gains. Rather than attempting to sidestep every drawdown, the model is designed to remain invested while adjusting risk exposure based on prevailing market structure.

The objective is simple in concept, though difficult in execution: outperform the broader market over time. This is pursued by remaining long equities, dynamically adjusting allocations among index ETFs based on the current wave-state, and applying tactical leverage only when historical analogs indicate a high probability of favorable outcomes. In those specific environments—where similar market structures have historically produced positive returns roughly 70–80% of the time—the Wave-State model has proven particularly effective at identifying opportunity windows.

This past week, the Wave-State remained Defensive (but still long). The market had already reached an elevated level of momentum and was beginning to cool when the Federal Reserve announced a significant policy change mid-week. That announcement produced a sharp bullish reaction, but it arrived at a moment when market conditions were already overheated. The resulting push into a “white-hot” state increased downside risk rather than improving forward return asymmetry.

Against that backdrop, the broad sell-off that followed on Friday was not unexpected within the Wave-State framework. While the Federal Reserve’s action is broadly constructive for markets looking ahead into 2026, near-term cooling remains the more probable path. Over the next one to two weeks, further moderation in the Wave-State is likely.

To be clear, this is not a definitive bearish call. It is a recognition of elevated risk. In defensive configurations, the portfolio shifts weight toward more stable index exposures such as SPY and DIA, while reducing exposure to higher-beta areas like QQQ and IWM. Historically, this mix has helped limit drawdowns during periods of market weakness, while still allowing participation should prices continue to drift higher.

The goal remains consistency and discipline—staying invested, respecting risk asymmetry, and allowing market structure, not headlines, to guide positioning.

Author note: Market analysis and this blog post were conducted and written by Red Oak Quant’s custom AI Agent.

Disclaimer: The information provided here is for educational and informational purposes only and should not be considered financial advice. I am not a licensed financial advisor, and my portfolio may not be appropriate for your financial goals or risk tolerance. All investments involve risk, including the potential loss of principal. Historical data and market models are not indicative of future results. Please consult with a licensed financial professional before making any investment decisions.

Landon Phillips 12/6/25 Landon Phillips 12/6/25

A New Equity Market Model (This Could Be Big.)

I’ve spent the last several years researching how markets actually move, not just price patterns, but breadth, momentum, volatility, and the internal health of the entire market ecosystem.

That research recently led to a powerful finding:

U.S. equity markets tend to move through three repeatable “Wave-States.”

From that discovery, I’ve built the Wave-State Equity Model, a rules-based approach that stays fully invested and adjusts index ETF exposure depending on the market’s current state:

Entry State: early improvement → opportunity phase
Continuation State: established strength → participation phase
Defensive State: weakening conditions → preservation phase

This isn’t market timing.
It’s adaptive exposure based on how markets have historically behaved in each state.

Backtesting has shown that this state-based approach, particularly when utilizing tactical leverage in Entry phases, has consistently outperformed the broader market across multiple cycles and protected against significant losses.

The mission is simple:

Beat the market by staying in the market while adjusting Index ETF portfolio exposure (SPY, DIA, QQQ, IWM) as the wave evolves, and apply tactical leverage during high probability wave-states.

Summary

Through independent research, I’ve identified what I now call the Wave-State Equity Model, a repeatable structure in how market trends evolve through phases of improvement, continuation, and deterioration.
Using this model, I backtested a rules-based allocation strategy, including tactical leverage during early-strength periods, and found consistent outperformance versus the broad market.
The approach remains always invested, rotating among index ETF allocations that correspond to the three Wave-States: Entry, Continuation, and Defensive.
The Wave-State Equity Model is not based on a single technical indicator, and it is not derived from studying one ETF in isolation.
This is not just a stochastic oscillator on a chart or a moving average crossover on a specific index.

The Evolution Into the Wave-State Equity Model

Over the past several years, our research into market behavior has led to a surprising but powerful independent finding: equity markets tend to move through a consistent three-phase structure, cycling between early improvement, sustained strength, and internal deterioration. This insight became the foundation of the Wave-State Equity Model, a structured approach for understanding where the market sits within its broader trend “wave.”

Unlike traditional timing systems, the Wave-State Model does not attempt to forecast tops or bottoms. Instead, it identifies the character of the environment and adjusts portfolio exposure accordingly. Our guiding philosophy is simple:

We aim to beat the market by staying in the market while adjusting ETF exposure, including high probabilty leverage periods, as the wave evolves.

A Broad-Market Approach, Not a Single-Indicator System

One essential distinction of the Wave-State Equity Model is that it is not based on a single technical indicator, and it is not derived from studying one ETF in isolation. This is not just a stochastic oscillator on a chart or a moving average crossover on a specific index.

Instead, the model reflects a holistic analysis of the equity market as a whole, incorporating:

Market breadth and the degree of participation across sectors
Momentum structure across major index families
Volatility conditions, particularly how implied volatility behaves in different phases
Cross-index relationships, including divergences between small caps, large caps, and tech leadership
Overall trend coherence, identifying whether the market is aligned or fractured

By evaluating how the entire market ecosystem behaves, not just one signal or one index, the Wave-State Model provides a broader and more stable interpretation of trend quality and trend deterioration.

This is a key reason the model works:
It defines states of the market, not merely signals on a chart. And those states have shown remarkably consistent historical behavior.

The Three States of the Wave

1. Bullish Entry State

(The beginning of a rising wave — highest opportunity)

The Entry State identifies the earliest stage of new upside momentum, strong enough to matter, and early enough to offer a significant opportunity. Historically, this phase shows the most attractive reward-to-risk characteristics, which is why tactical leverage is permitted here.

This is the “opportunity phase” of the trend, and separating it from later stages is one of the breakthroughs of the Wave-State Model.

2. Bullish Continuation State

(The body of the wave — steady participation)

As conditions strengthen and stabilize, the trend enters a more mature phase. Markets often continue higher, but the advantages of early entry have already passed.

The Continuation State keeps the portfolio fully invested, but without leverage, using a diversified blend of index ETFs designed to ride the trend without unnecessary risk amplification.

This distinction between Entry and Continuation is a major improvement over the old methodology, which treated all bullish environments as identical.

3. Defensive State

(The wave weakens — preservation phase)

The Defensive State activates when the underlying character of the market begins to deteriorate. This can happen even when prices appear stable. Historically, these conditions precede greater volatility and weaker forward returns.

In this phase, exposure shifts toward more balanced, broad-market ETFs. We remain invested, consistent with our core mission, but in a configuration aimed at capital preservation and drawdown reduction.

Why the Wave-State Equity Model Works

1. It separates opportunity from participation.

Early-stage trends behave differently from mature ones. Treating them as distinct states improves performance.

2. It adjusts exposure, not participation.

The portfolio is never “risk-off” in the traditional sense. Instead, it adapts allocation weights to match the environment.

3. It is grounded in broad-market behavior.

Breadth, momentum, volatility, and inter-index dynamics all contribute to defining the wave.

4. It supports our mission.

The objective is clear: beat the market by staying fully invested and by aligning exposure with the most favorable historical environments.

Backtesting has shown that this approach consistently outperformed passive benchmarks, not through forecasting, but through disciplined adherence to state-based allocations.

This Week’s Market State: Defensive

As of Friday’s close, the Wave-State Equity Model shifted into a Defensive State. While overall indices remain elevated, internal conditions have started to roll over, historically a signal to adopt a more conservative ETF mix.

This isn’t a prediction of decline. It is a rules-based, historically grounded allocation shift designed to preserve capital during the later stages of the wave.

Landon Phillips 11/30/25 Landon Phillips 11/30/25

Moderate Returns Expected Following A Big Move

The equity markets extended their recent strength this week as broad participation improved and several major index ETFs broke higher from their mid-month consolidation ranges. The overall environment has shifted into what can best be described as a healthy upside expansion, driven by continued buying pressure across large-cap and technology-heavy areas of the market.

Short-term momentum indicators across the major indexes have moved decisively into positive territory, reflecting the strong follow-through from last week’s rally. While some measures are now approaching elevated levels—particularly those tied to shorter-duration oscillations—the broader trend structure remains constructive. Historically, this type of backdrop has supported modestly favorable forward outcomes over the next one to two weeks, especially for broad index products such as SPY and QQQ.

Historical analysis of similar market environments shows a 60–67% probability of positive returns over the next 7–14 days for the large-cap segments of the market, although the expected returns are not outsized. A percent or two seems to be the expected outcome of our Monte Carlo simulations over the short term. The technology sector, represented by QQQ, carries the highest drift profile during comparable periods. Small-caps, on the other hand, continue to underperform on a relative basis, with weaker forward-looking probabilities and more variability in outcomes.

Volatility conditions remain contained, and risk appetite across institutional segments appears steady. While short-term overextensions can lead to minor cooling phases, the current setup still leans toward continued stability and upward bias rather than immediate reversal risk.

Overall, the market environment remains favorable, though selective. Large-cap and growth-oriented exposures continue to demonstrate the most resilient behavior, while small-caps lag and warrant a more cautious interpretation.

Author note: Market analysis and this blog post were conducted and written by Red Oak Quant’s custom AI Agent.

Landon Phillips 11/23/25 Landon Phillips 11/23/25

Market Update - Fear Cooldown and a Cautious Bounce

Equity markets are attempting a recovery following a recent bout of volatility. Short-term momentum indicators that were deeply oversold just a few sessions ago have turned higher, while longer-term trend measures remain mixed. One of the key changes over the last couple of days is in volatility itself: after a sharp spike, the volatility index has started to cool back down, a pattern that has historically aligned with better forward returns over the next few weeks.

Looking across the major U.S. indices, our statistical work using historical data suggests modestly positive odds over the next one to two weeks. When we look back at past periods with similar conditions—oversold momentum, stabilizing breadth, and a fading volatility spike—the average forward returns for large-cap and growth indices are slightly positive, with a reasonable chance of seeing gains in the low-single-digit range. At the same time, the range of outcomes remains wide; there are still plenty of historical cases where the first bounce after a volatility shock fails and prices retest recent lows.

To better understand this risk-reward profile, we use a Monte Carlo framework. In simple terms, this involves fitting a probability distribution to past returns observed in similar environments and then simulating many possible paths forward. The current simulations show a tilt toward positive outcomes, but they also emphasize that losses of a few percent over the next week or two are still very much on the table. This is not the kind of setup that calls for extreme caution, nor is it one that justifies maximum aggression.

Practically, that points toward a balanced stance: maintaining a meaningful allocation to broad equity exposure, with some tilt toward growth and technology where the upside has historically been stronger in these environments, while also preserving hedges and liquidity in case volatility returns. In other words, it looks like a window where being invested makes sense, but doing so with risk controls and contingency plans is still essential.

Author note: Market analysis and this blog post were conducted and written by Red Oak Quant’s custom AI Agent.

Note the negative skew of the SPY forward returns; significant negative returns are still possible.

The QQQ skew is also negative, indicating that the possibility of significant negative returns is still possible.

Landon Phillips 10/29/25 Landon Phillips 10/29/25

Market Alert - Historical Drawdown Pattern

Author’s Note:

Hello everyone, I'd like to post a brief introduction to the AI-generated post. I’ve been studying the underlying signal that the AI uses since 2009, and some patterns serve as red flags before big risk events materialize. One of those flags appeared today. I recognized it and asked the AI to review the historical data to determine the significance. Below you’ll read the findings. This is something I want to publish because I know some folks make trades based on my signal. For those followers, I recommend reading this. I can’t guarantee that it will happen, and I’m not calling for you to dump your trades. I am, however, going to trust the data and my instinct to find some safe harbor for my portfolio.

AI Analysis:

Over the past decade, our Signal-based model has identified a repeating pattern that frequently precedes short-term market corrections: a failed thrust — when internal momentum (the Signal) rebounds from oversold conditions but stalls and rolls over.

This pattern has now reappeared. The current Signal readings as of October 29, 2025 align closely with the same technical setup observed before prior drawdowns. The model shows a rebound from oversold levels earlier this month and a subsequent rollover within just a few sessions — all hallmarks of the Failed-Thrust regime that has historically preceded elevated downside volatility.

Our historical backtest identified nine comparable events since 2015, with the following tendencies:

Average SPY drawdown: –5.0% within 10 trading days
Median time to trough: 8 trading days
Probability of ≥3% decline: ~40%
Most severe examples: Dec 2015, Sep 2022, and Mar 2025

Over 80% of these events produced negative short-term returns across SPY, DIA, QQQ, and IWM — confirming that when the market’s internal breadth thrust fails to sustain above the mid-range, short-term downside volatility typically follows.

While this signal doesn’t necessarily mark the start of a prolonged bear market, it does indicate that markets are again in a historically high-risk window — where volatility spikes and short, sharp drawdowns are more likely than usual over the next one to two weeks.

Author note: Market analysis and this blog post were conducted and written by Red Oak Quant’s custom AI Agent.

Disclaimer: The information provided here is for educational and informational purposes only and should not be considered financial advice. All investments involve risk, including the potential loss of principal. Historical data and market models are not indicative of future results. Please consult with a licensed financial professional before making any investment decisions.

Landon Phillips 10/26/25 Landon Phillips 10/26/25

A Moderately Bullish Short-Term Pattern Is Expected

Equity markets ended the week in a steady holding pattern after several weeks of consistent gains. Market breadth continues to show improvement, but the rate of change has begun to slow. Volatility remains subdued with the VIX holding near 16, signaling continued calm conditions.

This week’s modeling places the market in a neutral but upward-trending regime — a constructive backdrop characterized by moderate momentum and low volatility. Historical analysis shows that environments like this often yield modest positive returns over the following 7 to 14 days, though progress tends to come in fits and starts rather than sustained rallies.

Methodology

This outlook is derived from historical regime analysis, applying a lognormal distribution fit to forward return data for the major equity ETFs (SPY, DIA, QQQ, and IWM) and the volatility ETN (VXX).

For each asset:

Historical periods matching today’s conditions were identified from a merged dataset of market breadth and volatility indices.
Forward 7-day and 14-day returns from those periods were fitted to lognormal distributions to capture the natural asymmetry and fat-tailed behavior of markets.
100,000-run Monte Carlo simulations were performed for each ETF, producing probability distributions for near-term returns, confidence scores, and risk bands.
These simulation results were then fed into a risk-adjusted optimization process, assigning weights proportional to each asset’s expected return, volatility, and confidence score, with a built-in cash reserve for flexibility.

This methodology avoids over-reliance on any single indicator. Instead, it blends empirical regime probabilities with simulated forward-return distributions to produce an objective, data-driven forecast.

Results and Portfolio Implications

Across all simulations, the equity ETFs displayed nearly normal distributions of expected returns — symmetrical and consistent with a stable uptrend. The exception was VXX, which retained a positively skewed profile (occasional sharp gains amid frequent small losses), confirming its continued role as a tail-risk hedge rather than a core holding.

Under these conditions, the optimum portfolio for the next 7 days was determined as:

This mix reflects a mildly bullish stance — overweight cyclical and growth segments while maintaining measured downside protection.
Expected 7-day portfolio return is approximately +0.6 % with an estimated volatility of 0.5 % and a 63 % probability of a positive outcome.

Interpretation

Momentum remains favorable, but short-term oscillators are approaching overbought territory, suggesting a slower grind higher rather than an acceleration. The data imply continued resilience, not euphoria.

Should market breadth expand further and volatility remain low, the model will likely favor a shift toward higher-beta exposure or selective leveraged instruments. Conversely, any deterioration in momentum or a VIX rise above 18 would argue for trimming risk and expanding cash or volatility hedges.

Author note: Market analysis and this blog post were conducted and written by Red Oak Quant’s custom AI Agent.

Landon Phillips 10/18/25 Landon Phillips 10/18/25

Market Analysis: Building Smoothed Probability Forecasts from Historical Data

Understanding market probabilities isn’t about guessing the next move — it’s about quantifying what has historically occurred under similar conditions, then translating those tendencies into a forward-looking model.

Our process uses a blend of empirical data, statistical fitting, and Monte Carlo simulation to generate the expected range of outcomes over various time horizons.

Our current model suggests a moderate probability of positive returns over the next 7-14 days.

Here is how we simulated the outcomes:

1. Evaluate Historical Empirical Data

We begin by isolating prior market periods that resemble today’s environment — in this case, a Bearish / Uptrend regime with a moderately improving Signal. For each major index (SPY, DIA, QQQ, IWM), we calculate forward returns across 7-day and 14-day horizons.

This produces a collection of historical analogs that capture how markets typically behave when the broader trend is stabilizing but not yet fully bullish.

2. Fit a Skewed Probability Distribution

Instead of assuming a perfect bell curve, we fit a skew-normal distribution to the historical return data.
This allows the model to capture asymmetry — the reality that relief rallies often have limited downside but fatter right-tail outcomes.

By fitting this distribution, we convert raw historical returns into a smooth, continuous probability curve that reflects real market bias more accurately than a traditional normal model.

3. Apply Monte Carlo Simulation

Finally, we use the fitted skew distribution as the foundation for a Monte Carlo simulation — generating over 100,000 randomized return paths for each index and time horizon.
The result is a smoothed forecast distribution showing:

The probability of a positive return,
Expected median and mean outcomes,
And percentile ranges (P25, P50, P75, P90) that describe the most likely boundaries of short-term movement.

This technique provides a probability-based outlook grounded in market history and statistical structure — not subjective opinion.

Interpretation

The current Bearish-Uptrend setup historically aligns with a moderate positive bias, where 7-day win rates hover near 60% and 14-day outcomes improve toward 65–70%.
The right-skewed distribution implies limited downside but a persistent, uneven path of recovery — a classic early-stage rally profile.

Confidence in the Results

Confidence in our forecasts does not mean predictability — it means stability.
The model isn’t claiming to know what happens next; it’s showing how consistent the data are when this setup has occurred in the past, and how stable those outcomes remain when we simulate them thousands of times.

In this analysis, we’re drawing on 130 historical analog periods that match the current market regime (Bearish / Uptrend). That sample size gives us a reliable foundation to estimate probability ranges without relying on a small handful of outliers.

Once those analogs are identified, we fit a skew-normal distribution to the observed returns. The quality of that fit — its alignment with the empirical histogram — determines how faithfully the model represents real historical behavior. When the fitted curve captures the same mean, variance, and skew as the underlying data, the model achieves what we call statistical confidence.

From there, we use Monte Carlo simulation to generate 100,000 randomized return paths. The law of large numbers ensures that the simulated mean and percentile bands converge tightly around their true expected values. That convergence is a key indicator of numerical confidence — it means the result would remain essentially the same even if the simulation were repeated many times.

Together, these layers of evidence — ample historical depth, strong statistical fit, and Monte Carlo stability — define our level of confidence.
In this case, the combined factors support a High Confidence classification: the results are stable, repeatable, and empirically grounded, even though the future itself remains inherently uncertain.

In short:

Observe what happened before.
Model its shape with a skewed probability curve.
Simulate thousands of alternate futures.
Use those probabilities to frame decisions.

This process turns the market’s past behavior into a living model that adapts as new data arrives — one of the core principles behind Red Oak Quant.

Author note: Market analysis and this blog post were conducted and written by Red Oak Quant’s custom AI Agent.

Landon Phillips 9/21/25 Landon Phillips 9/21/25

Neutral Outlook On The Back Of FOMC

Markets melted higher this week on the back of the FOMC’s rate cut decision. Major indexes finished with gains of +1% to +2%, a move that sits comfortably inside our projected ranges.

Despite the strength, our signal framework continues to hold a neutral stance. The key theme remains variability: while the averages suggest flat outcomes, the distributions show plenty of room for meaningful swings in either direction over the next 7–14 days.

That’s why the portfolio model emphasizes risk balance. Rather than chase the latest rally, we stay focused on protecting capital when downside remains as likely as upside — while still participating in upward momentum when it appears.

Looking into next week, the forecast remains neutral with high variability. In practice, that means chop is the base case, but surprises can still run in either direction. As always, the signal will guide when conviction shifts more decisively.

Author note: Market analysis and this blog post were conducted and written by Red Oak Quant’s custom AI Agent. The proprietary signal framework was originally developed through human research and remains under human oversight to ensure accuracy and reasonableness.

Landon Phillips 9/6/25 Landon Phillips 9/6/25

The Market’s Balancing Act: A Defensive Turn

This week highlighted the market’s transition from steady strength into a more unsettled posture. While equities have enjoyed a long run higher since spring, conditions now point to turbulence beneath the surface.

Our Signal held elevated through early in the week, but by Friday it compressed meaningfully — a clear sign that breadth is softening and short-term momentum has lost its edge. Historically, when the Signal hovers in this “compressed” zone, markets tend to struggle with follow-through and often experience volatility events.

Defensive Adjustments

We leaned into that reality. Over the course of the week, our allocation shifted step by step: trimming SPY, QQQ, and IWM exposure, while raising both cash and volatility hedges. By Friday’s close, the portfolio stood at just over 60% equities, balanced by 26% cash and 13% in VXX. That’s a notable shift from last week’s higher equity stance, reflecting our commitment to avoiding large drawdowns while staying prepared for recovery opportunities.

The Volatility Trap

Our instinctive framework (i.e., the human element of decision-making) adds another layer: when momentum indicators rebound slightly from mid-range levels, they often precede volatility spikes. This “volatility trap” has emerged in the current setup, indicating that while the broader trend remains intact, the near-term environment carries an elevated risk. In most instances where this setup has appeared in the past, a better buying point emerged within 14 days or so. Sometimes the decline is violent, sometimes it’s modest. While we can’t say which case will unfold, we can build the portfolio for protection. The end goal of the portfolio research is to simply outperform the “market,” so there’s no need to be a hero here. Patience is key.

A Neutral Forecast

Statistically, the next 7-day outlook is strikingly neutral. As the SPY distribution chart shows, the expected return is close to zero, with probabilities of positive versus negative outcomes nearly balanced. This underscores the key point: patience is warranted. Markets may grind sideways, whip up volatility, or briefly reset before healthier setups emerge.

Author Note: Market analysis and this blog post were conducted and written by Red Oak Quant’s custom AI Agent, using proprietary methods originally developed through years of human research and continuously overseen by a human for accuracy and reasonableness.

This chart shows the change in our research-driven portfolio construction algorithm recommendation over the last week. An increase in cash and VXX hedge are notable with a corresponding reduction in QQQ.

This distribution chart shows the return probabilities for SPY over the next 7 days with indicators at one standard deviation. Strikingly neutral.

This chart shows the distribution returns for VXX over the next 7 days. Note how wide the standard deviations are, indicating a wide range of possibilities and variability in the data set.

Landon Phillips 8/29/25 Landon Phillips 8/29/25

A.I. Advises Bullish Caution; Signal Is Conveniently Aligned For September Swoon

September has long carried a reputation as the weakest month for stocks, and history backs it up. Since 1950, the S&P 500 has averaged negative returns in September more often than any other month. The reasons vary — from portfolio rebalancing to investor psychology — but the pattern is hard to ignore.

This year, that seasonal backdrop aligns neatly with our Signal. At Friday’s close, the Signal held well above neutral, keeping us in bullish territory — but momentum has weakened, breadth has softened, and volatility has begun to creep higher. In other words, conditions are stretched.

A useful way to picture it is like a spring. For weeks now, the market’s spring has been pulled apart — breadth expanding, overbought readings persisting, and the Signal staying elevated. But springs don’t stretch forever. Eventually, they snap back toward their neutral state. History suggests September may be when that compression begins. A pullback of 3% to 5% sometime in September would not be abnormal given the conditions.

Importantly, a snapback doesn’t mean collapse. In fact, pullbacks often create the setup for high-probability recoveries. Our Signal is specifically designed to identify those transition points — when excess has been worked off and conditions shift back toward strength. That’s when probabilities become most favorable for renewed upside.

And while headlines will no doubt be written to explain whatever happens next, we view the news as narrative, not cause. Markets move because of structural tension — the spring itself — and the news simply gives us the story afterward. This is why we don’t trade headlines; we trade the Signal.

On Projections vs. Positioning

Last week’s probability model leaned heavily toward positive 7-day returns. That outcome didn’t materialize — equities slipped instead. This shows the natural limits of forecasting: probabilities tilt the field, but they don’t erase uncertainty.

What mattered more was the construction model — the framework that guided our portfolio allocation. Even as projections pointed higher, the construction model called for a measured, slightly defensive stance: balanced equity exposure, extra cash, and a volatility sleeve. That positioning kept us in the game during the early part of the week, but with enough protection in place as weakness materialized into the close.

In short, the projection model told us where the odds leaned; the construction model made sure we were prepared if the less-likely path took hold.

As we head into September, the message is simple: the long-term trend remains constructive, but the near-term path is likely to be bumpier. The spring is stretched, compression is due, and history suggests the next reset may ultimately prepare the way for recovery.

Author note: Market analysis and this blog post were generated through Red Oak Quant’s proprietary research framework, implemented with the assistance of an AI agent for back-end data analysis and drafting. The methods and workflow were originally developed by a human researcher, and all outputs are reviewed by a human for accuracy and reasonableness before publication.

Disclaimer: The information provided here is for educational and informational purposes only and should not be considered financial advice. The analysis reflects historical data, model-driven probabilities, and professional judgment, but it is not a guarantee of future results. All investments involve risk, including the potential loss of principal. Please consult with a licensed financial professional to determine what is appropriate for your financial goals and risk tolerance.

Landon Phillips 8/24/25 Landon Phillips 8/24/25

The A.I. was right about the snapback, now it’s calling for better odds for bulls.

Last week our Signal reliably flagged the risk of a short-term pullback, and the market delivered exactly that — five straight days of decline, the longest such stretch since January. By shifting to a slightly defensive, neutral portfolio mix, our strategy avoided the brunt of that weakness. This is by design: the portfolio algorithm aims to sidestep major drawdowns while still participating in market upside when conditions improve.

This week brought the improvement. After several sessions of pressure, equities reversed sharply on news from the Federal Reserve. The Signal responded in kind, surging decisively into bullish territory. Breadth expanded, momentum turned positive, and risk gauges eased, confirming a shift into a Bullish / Uptrend regime.

With this transition, we are rebalancing back toward equities, spreading exposure across the S&P 500, Nasdaq, Dow, and Russell 2000. At the same time, we continue to hold a modest cash reserve. Extreme breadth thrusts often come with elevated snapback risk, and our staged approach allows us to participate in the new trend while preserving flexibility if short-term volatility returns.

Looking forward, the probabilities favor continued strength over the next several weeks. Historically, similar setups have shown elevated odds of positive returns, particularly in large-cap and technology-focused indices. Even so, discipline remains key. Overbought conditions suggest the near-term path could still include pauses or shallow pullbacks, even within a constructive broader trend.

As always, we’ll let the data lead. If strength persists, we will increase equity exposure further. If momentum stalls, our balanced positioning provides protection. For now, the evidence supports leaning bullish while respecting short-term risks.

If you like our content, tell a friend! Share this blog in a message or email to help us grow our audience.

Author note: Market analysis and this blog post were conducted and written by Red Oak Quant’s custom AI Agent.

Landon Phillips 8/16/25 Landon Phillips 8/16/25

Rotation From Risky to Neutral

This week was a reminder that even in upward-trending markets, risk management matters. The Signal held in neutral territory but weakened into the close on Friday, pulling back from earlier strength. While momentum remains intact, breadth has softened and short-term risk levels are elevated.

Our positioning reflects that reality. Over the past several weeks we’ve leaned steadily into equities, but this week we rotated further toward a defensive-neutral mix. That means balanced exposure across the major indices — S&P 500, Dow, Nasdaq, and Russell 2000 — paired with a meaningful cash reserve. Importantly, leveraged positions are now fully closed. In prior cycles, conditions like these have often marked transition periods where volatility can re-emerge suddenly, even if longer-term outlooks remain constructive.

Looking forward, the Signal suggests a continued neutral stance is warranted. The probabilities of positive returns remain modestly favorable for equities, but the environment also carries above-average risk of short-term pullbacks. Historically, setups like this tend to reward patience — holding balanced allocations while waiting for the next high-conviction shift.

As always, we’ll let the data guide the strategy. If conditions strengthen, we’ll re-enter more aggressively. If weakness accelerates, our defensive posture will help absorb the shock. For now, steady positioning and disciplined risk management remain the playbook.

Author note: Market analysis and this blog post were conducted and written by Red Oak Quant’s custom AI Agent.

Disclaimer: The information provided here is for educational and informational purposes only and should not be considered financial advice. I am not a licensed financial advisor, and my portfolio may not be appropriate for your financial goals or risk tolerance. All investments involve risk, including the potential loss of principal. Historical data and market models are not indicative of future results. Please consult with a licensed financial professional before making any investment decisions.

Landon Phillips 8/10/25 Landon Phillips 8/10/25

Building New Quant Models With GPT 5

This week, OpenAI released GPT-5 for general public use. I’ve spent the past several days putting it through its paces — running fresh backtests, refining concepts, and improving how I identify broad market pivots. My initial impression: it’s powerful. GPT-5 handles complex rule sets far better than earlier versions, though it’s not flawless. It will still make mistakes, so it’s critical to review its outputs carefully.

One pro tip from experience: ask GPT-5 for any intermediate files it creates before you close out a session. These models generate a lot of working files in the background, and once the session ends, they’re gone. If you don’t save them, you’ll have to start from scratch.

One of the new tools I’ve been testing is a Trough Recovery Score. The idea came from the challenge of dealing with over a decade of backtest data, covering about six key variables in the signal. The combinations are enormous, which means that for some setups, there may only be a handful of identical historical cases to reference. The scoring system solves that problem by creating a more generalized, composite measure of favorable “trough to recovery” conditions.

It works surprisingly well. GPT-5 helped me design the scoring and backtesting methodology in a way that balances robustness with the need to avoid overfitting. The result is a metric that captures the bulk of what my experience tells me to look for — but with historical probability data behind it.

Right now, the Trough Recovery Score for the current market stands at 80 out of 100, a level that historically comes with an increased probability of positive returns over the next two weeks. The chart below shows the system’s historical outputs for this setup.

Author’s note: This article was edited for clarity by AI.

Disclaimer: This content is for educational and informational purposes only and does not constitute financial, investment, or trading advice. I am not a licensed financial advisor. Any strategies, models, or projections discussed may not be suitable for your specific financial situation or risk tolerance. All investments involve risk, including the possible loss of principal. Historical performance and model-based scenarios are not indicative of future results. Always consult a licensed financial professional before making investment decisions.

Landon Phillips 8/1/25 Landon Phillips 8/1/25

Quant AI Signals Additional Caution

Markets extended their recent decline today, with broad-based weakness across major indices. The Red Oak Quant Signal declined further into oversold territory, while several momentum indicators remain under pressure.

Volatility continues to rise, with the VIX closing at 20.38 — reflecting elevated uncertainty but not yet signaling resolution. While some breadth indicators are now near historical low levels, the environment remains unfavorable for new long entries until conditions stabilize.

The recommended posture remains defensive. Allocations continue to favor volatility protection and cash, while participation in equities is minimized across all categories. While oversold conditions often precede tactical reversals, we prefer to wait for further confirmation from both volatility and momentum indicators.

Patience remains warranted until volatility begins to subside and trend conditions begin to improve.

Author note: Market analysis and this blog post were conducted and written by Red Oak Quant’s custom AI Agent.

Landon Phillips 7/29/25 Landon Phillips 7/29/25

Quant AI Flashes A Short-Term Warning

Today’s market signals have turned distinctly bearish, indicating heightened caution. The significant drop in our signal, along with a strongly negative secondary indicators and weakening Signal momentum, highlights increased downside risks. Additionally, stochastics are swiftly moving towards oversold conditions, reinforcing the near-term bearish sentiment.

Volatility, as measured by the VIX, rose moderately to 15.98, reflecting increased investor anxiety and potential market turbulence ahead. Consequently, our recommended portfolio allocation strongly emphasizes defensive positions, including significant exposure to volatility instruments (VXX) and elevated cash reserves to preserve capital and provide flexibility.

Investors should brace for potential downward movements in major indices (SPY, DIA, QQQ, IWM) over the short to medium term. Maintaining vigilance and defensive positioning is crucial until signals show stabilization or improvement.

Author note: Market analysis and this blog post were conducted and written by Red Oak Quant’s custom AI Agent.

The image above displays the probability of positive return by ticker symbol. Dashed lines indicate our model’s maximum and minimum probability limits.

Landon Phillips 7/19/25 Landon Phillips 7/19/25

A Market in Waiting

The close of this past week leaves us with a market in transition. Our signal moved into a neutral posture on Friday, suggesting no clear advantage for either the bulls or the bears.

Momentum is cooling, and while we’re not seeing widespread weakness, the enthusiasm from earlier in July has faded. Key indicators have slipped lower, confirming that the rally is taking a breather.

During this phase, we maintain a balanced portfolio posture. That means diversified index exposure—DIA, SPY, and QQQ—with a healthy allocation to cash. This approach helps preserve gains while staying flexible for whatever direction the market chooses next.

We’ll keep watching for a pivot—either into bullish strength or deeper weakness. For now, it’s best to stay even-footed.

Author note: Market analysis and this blog post were conducted and written by Red Oak Quant’s custom AI Agent.

Landon Phillips 7/15/25 Landon Phillips 7/15/25

Market Internals Shift to a More Cautious Stance

After a steady stretch of strength across the equity markets, today’s data reflects a notable change in tone. Our internal signal, which tracks broad market participation and momentum, moved sharply lower — a drop of nearly 22% in one session — suggesting a shift away from the recent bullish regime.

This kind of movement doesn’t automatically imply a major correction ahead, but it often signals that the easy upside may be behind us, at least for now.

Short-term momentum indicators such as stochastics and MACD have both turned lower, and broader participation — particularly among smaller-cap names — is beginning to narrow. Notably, IWM (small caps) continues to lead on the downside, consistent with prior patterns where riskier segments of the market react first to changing conditions.

Breadth and relative strength indicators also weakened today, pointing to a market that may be entering a consolidation or retracement phase. Importantly, volatility remains contained, and we’re not yet seeing signs of broader investor concern.

Historically, this environment tends to deliver mixed outcomes. Short-term return probabilities over the next 7 to 14 days decline, while longer horizons often see stabilization and potential recovery — depending on how momentum evolves in the coming sessions.

In short:

The signal has shifted out of its prior bullish zone.
Breadth and momentum are softening.
While not bearish outright, the market looks less supportive in the near term.

This is a time to be observant. Tactical positioning may be more appropriate than directional conviction until the signal reasserts itself.

Author note: This analysis and the writing of the blog post were conducted using Red Oak Quant’s custom AI agent and market model.

Landon Phillips 7/12/25 Landon Phillips 7/12/25

Quant Model Updates

It has been some time since my last blog post about the US Equity Markets. Previously, I highlighted that we needed to see a clearing signal from the market following our recent correction. I stated that the clearing can take some time, even months. That has proven to be true. The market has rallied impressively since its lows, and if someone was able to participate, they are experiencing substantial gains. Now, the clearing event is complete, and our model should resume its normal accuracy.

During this time, I’ve had the opportunity to update my quant model and work to improve the outputs. AI has improved substantially and rapidly. I’m impressed with the current state of the technology. The agent I’ve created is faster and easier to use than ever before. While I still believe it’s important to have a human-in-the-loop, the analytical capabilities are quite impressive. Particularly exciting is the ability to “see” charts and interpret the data. I’ve been giving it the most complicated charts that I have, and it consistently reads them with accuracy, and occasionally points out insights that I’ve missed. It has become a true partner in my analytical process.

Below is the analysis that my AI agent created for the current market state:

After several days of steady upward movement, today’s market action delivered a decisive shift in our core signal.

The signal — which tracks internal strength across a wide swath of U.S. equities — had been hovering in overbought territory for nearly a week. Historically, this regime supports continued gains, especially when paired with a low-volatility environment like we’ve seen. However, those conditions no longer hold.

Today, the signal dropped sharply, decisively breaking below its overbought threshold. At the same time, short-term momentum indicators rolled over from their recent peaks. This combination — a fading internal breadth coupled with peaking momentum — often marks the start of a pullback phase.

Small caps were the first to break. While large-cap indices like the Dow (DIA) and S&P 500 (SPY) are still holding near highs, more speculative corners of the market (notably small caps and growth) are already rolling over. This divergence tends to precede broader weakness.

Our model classifies today’s conditions as a "pullback regime," where probabilities of short-term gains fall below 50% and average returns flatten or turn slightly negative over 7–14 days. These phases are typically brief but meaningful — and often present tactical re-entry opportunities once exhaustion plays out.

For now, the takeaway is simple: momentum has stalled, and risk has risen.

Disclaimer: The information presented here is for educational and informational purposes only and should not be construed as financial advice. I am not a licensed financial advisor, and my portfolio may not align with your financial goals or risk tolerance. All investments carry risks, including the potential loss of principal. Historical data and model-based projections are not guarantees of future performance. Always consult a licensed financial professional before making any investment decisions.

Landon Phillips 4/27/25 Landon Phillips 4/27/25

A Few Positive Signs Are Emerging

Last week, I discussed the broader macro perspective of the market and highlighted several technical and fundamental reasons why the equity market is likely facing a few months of headwinds. While I still believe that to be an accurate macro view, I also expect there will be tactical trading opportunities that emerge throughout this period.

Notably, our "signal" has historically shown a peculiar ability to provide early warnings of major market selloffs, such as the one we just experienced. There have only been a handful of such declines captured by the signal in its history, so I continue to categorize this behavior as “interesting, but not yet proven.”

Before any meaningful tactical trading can resume, there is typically a "clearing" event in the signal that needs to occur. Encouragingly, that clearing event appears to be underway. It often takes time to fully develop—sometimes several months—but once it does, conditions may again favor tactical trading strategies based on our AI model. Until that process is complete, I will continue to maintain a defensive posture in my portfolio composition.

Disclaimer: The information provided here is for educational and informational purposes only and should not be interpreted as financial advice. I am not a licensed financial advisor, and my portfolio strategies may not align with your financial goals or risk tolerance. All investments carry inherent risks, including the potential loss of principal. Historical data and model-based projections are not guarantees of future performance. Please consult with a licensed financial professional before making any investment decisions.

Landon Phillips 4/18/25 Landon Phillips 4/18/25

A Little Bit of Pain: Why Consumer Debt Signals a Coming Economic Storm

Over the past month, the economic landscape has shifted meaningfully. It’s become clear that the U.S. is fully willing to cut off a finger if it means forcing other countries to cut off an arm—or worse. That’s not a strategy without risk, and it seems foolish not to prepare our portfolios accordingly.

I moved into very defensive positions as the downturn began, and I’ve maintained that posture. The big question now is: how long will this economic cold front last?

Let’s take a step back. Below is a 20-year monthly chart of VTI, the Vanguard Total Stock Market ETF. The red line is the 50-period simple moving average—a well-watched technical level. Time and again, we see that the market likes to bounce off this support.

Below the chart is the Simple MACD (Moving Average Convergence Divergence) indicator.

Don’t outsmart your common sense: when the red and blue lines cross, market momentum tends to follow for months. Based on this, I wouldn’t expect the market to find meaningful technical support for at least another six months, give or take.

Now, let’s look beyond the charts and into real-world fundamentals. I asked ChatGPT to gather several consumer-related metrics. I believe consumers are the lifeblood of the economy, and their financial health is a strong bellwether of what’s to come.

Two metrics in particular have had my attention for a while now—long before the current administration took office:

Rising credit card balances
Falling personal savings rates

Don’t outsmart your common sense.
When people deplete their savings and rely on credit to maintain lifestyle spending, it’s just a matter of time before reality delivers a gut check. I think we’re right on that edge. Review the data below and you’ll likely come to the same conclusion.

So, what does all this mean? Brace yourself. We’re in for an economic roller coaster ride.

Summary

The Evolution Into the Wave-State Equity Model

A Broad-Market Approach, Not a Single-Indicator System

The Three States of the Wave

1. Bullish Entry State

2. Bullish Continuation State

3. Defensive State

Why the Wave-State Equity Model Works

1. It separates opportunity from participation.

2. It adjusts exposure, not participation.

3. It is grounded in broad-market behavior.

4. It supports our mission.

This Week’s Market State: Defensive

Methodology

Results and Portfolio Implications

Interpretation

1. Evaluate Historical Empirical Data

2. Fit a Skewed Probability Distribution

3. Apply Monte Carlo Simulation

Interpretation

Confidence in the Results

In short:

Defensive Adjustments

The Volatility Trap

A Neutral Forecast

On Projections vs. Positioning

RedOakQuant.com