Landon Phillips 3/15/25 Landon Phillips 3/15/25

Technical Pivot Or Fundamental Colapse?

In last week’s blog post, I suggested that the market might be attempting to establish a bottom but noted that a meaningful decline in the VIX would be needed for confirmation. It now appears that we may finally be seeing the VIX retreat. In the chart below, I have compared the S&P 500 to the VIX over a one-year period, highlighting recent VIX spikes and their corresponding S&P 500 lows. I use this relationship, alongside my AI-derived model, to identify potential market pivot windows. Historically, when these indicators align, they have provided a high-probability bullish entry signal over a 14- to 28-day period (or longer).

That said, I am not a proponent of blindly "catching a falling knife" when it comes to investing. While there are technical signals suggesting a potential entry opportunity, I remain mindful of broader fundamental factors impacting the market. Recent consumer confidence readings have been lower than ideal, and many public companies have adjusted their forward guidance due to signs of consumer weakness. Credit card debt remains elevated, and elected officials have signaled the likelihood of economic challenges as they restructure global economic relationships. Additionally, after two consecutive years of strong market gains, it is reasonable to ask: how long can this momentum continue?

With these factors in mind, I plan to approach any leveraged-long positions with caution. I am looking for further confirmation of a market pivot on Monday before committing.

By implementing a good defensive portfolio strategy, I’ve substantially avoided the market pullback thus far in 2025. I’ll continue to use the AI model and my overall risk mitigation strategies as we move through the rest of this year.

Based on the AI Quant model, the probabilities of a positive return are as follows:

7-day horizon: DIA (86%), SPY (71%), QQQ (57%)
14-day horizon: DIA (71%), SPY (57%), QQQ (57%)

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 3/8/25 Landon Phillips 3/8/25

Finding a bottom? As much art as science.

Using the AI model for market forecasting provides a scientific and data-driven approach, but there is still an essential element of human interpretation required for effective portfolio management. Much like a TV weatherman uses models to predict weather patterns, I leverage the AI model as a tool to develop market forecasts while applying years of study and observation of the underlying signals to interpret likely outcomes. In many ways, market forecasting is as much an art as it is a science.

Based on my interpretation of the signal data alongside the AI model, I believe we may be approaching a bottom for this pullback— which, for the Nasdaq, technically qualifies as a correction. The signal appears to be transitioning from a downtrend to an uptrend, and when combined with traditional market analysis, this suggests we could be finding a bottom. However, I am still watching for a reversal in the VIX as confirmation, which has not yet occurred. If and when that confirmation comes, I plan to execute my leveraged-long portfolio strategy to capitalize on the potential upside.

From a quantitative perspective, the model currently suggests a 70% probability of positive returns over the next seven days. Interestingly, the 14-day probability for DIA is lower at 55%, while SPY and QQQ remain elevated at 70% and 80%, respectively. These probabilities provide valuable context but must be assessed alongside broader market conditions.

Landon Phillips 2/25/25 Landon Phillips 2/25/25

A Bullish Pivot is Present

As of the market close on Monday, our model indicates the presence of a bullish pivot window. This can be likened to a spring that is compressed and pulled apart by market dynamics. Our model aims to identify the state of this spring. Currently, the spring is highly compressed and has the potential to expand rapidly, sending markets higher.

This marks the start of the window, which typically lasts a few days. We will seek confirmation that the market is beginning to recover from this medium-term pullback. We will analyze our proprietary signal methodology and look for traditional indicators, such as a decline in the VIX, which often accompanies pivots.

We will implement our leveraged-long trading strategy over the next few days. This approach increases our risk profile but also provides additional exposure to rapid recovery. As index ETF traders, we do this by reallocating portions of our portfolio into leveraged bullish ETFs. We will maintain this structure as long as the probabilities are favorable, which should enable us to outperform the market during this period.

Landon Phillips 2/22/25 Landon Phillips 2/22/25

Possible bullish pivot next week?

This week, our model temporarily halted its positive return trajectory over the 14 days until Friday. On Thursday and Friday, US Equity Markets experienced a decline, which aligned with the model’s projections and suggests a potential market pivot next week, possibly coinciding with NVIDIA's earnings announcement on Wednesday. Other economic news events could also act as catalysts, but significant attention will undoubtedly be directed towards NVIDIA on Wednesday morning.

Landon Phillips 2/13/25 Landon Phillips 2/13/25

Market Alert 2.13.25

As of mid-day today, our model has detected a notable shift in the probability of positive returns over the 14-day horizon. The model now indicates an 85.7% likelihood that the major market indices will be higher 14 days from now, signaling a strong bullish outlook.

However, it is important to note that the 7-day horizon currently reflects only a "slightly above average" probability of positive returns. Given this, we remain cautious about increasing risk exposure at this time, as historical patterns suggest that similar conditions have been accompanied by short bursts of volatility. We will continue monitoring market developments and provide updates as needed.

Landon Phillips 2/8/25 Landon Phillips 2/8/25

Market update 2.8.25

Looking ahead to the coming trading days, our model indicates a decreased probability of positive returns over the 7-day and 14-day horizons for the Dow, S&P 500, and Nasdaq. Several notable economic events are scheduled for next week, with particular attention on Federal Reserve Chair Jerome Powell’s testimony before Congress regarding monetary policy and the economic outlook, scheduled for Wednesday. This event could provide key insights into future market movements and policy direction.

Additionally, our model suggests that the market remains vulnerable to a sharp downward move, and Powell’s testimony could serve as a potential catalyst for such volatility. As always, we remain attentive to evolving market conditions and potential shifts in sentiment.

Landon Phillips 2/2/25 Landon Phillips 2/2/25

The Game Theory of Tariffs: What’s Next for Markets in 2025?

Introduction

The United States has once again entered a period of heightened trade tensions, implementing new tariffs on Canada, Mexico, and China as of February 2025. These tariffs—25% on Canadian and Mexican imports and 10% on Chinese goods—are intended to address concerns over trade imbalances, immigration, and national security. However, history tells us that tariff battles often lead to economic instability, market volatility, and retaliatory measures from affected countries.

Using game theory, we can predict how key players—these trading partners and the U.S.—will likely respond, and what that means for businesses, investors, and markets in the months ahead.

Game Theory and the Likely Outcomes

At its core, this tariff standoff resembles a prisoner’s dilemma, where each country must decide whether to retaliate, negotiate, or absorb the costs. Historically, tit-for-tat strategies dominate trade disputes—when one country imposes tariffs, others respond with their own. However, escalating trade wars harm all players, making cooperative negotiation the rational long-term move.

We can analyze the possible payoffs for each country using a simplified scoring system based on economic and political outcomes:

Optimal Strategies Based on Payoff Outcomes:

Short-Term (0-6 months): Tit-for-Tat Retaliation Likely
- Canada and Mexico implement countermeasures on U.S. exports (-2 U.S., -2 Can/Mex).
- China retaliates selectively while also using WTO legal pressure (-3 U.S., -3 China).
- The U.S. maintains tariffs but does not escalate immediately.
Medium-Term (6-12 months): Two Likely Paths
- Trade War Escalates (-3 to -5 U.S. loss) if the U.S. raises tariffs further.
- Negotiations Begin (+2 U.S.) if selective tariff exemptions are introduced.
Long-Term (12+ months): New Trade Agreement or Selective Tariff Rollbacks
- U.S. rolls back some tariffs in exchange for minor trade concessions (+2 U.S., -1 China).
- Markets stabilize as trade uncertainty fades.

What History Tells Us About Tariff-Induced Market Shocks

If history is any guide, market volatility is almost guaranteed. During the 2018-2019 U.S.-China trade war, tariffs wiped out an estimated $1.7 trillion in U.S. equity value, according to National Bureau of Economic Research (NBER). The S&P 500 saw multiple sharp drops following major tariff announcements, with trade-sensitive sectors—manufacturing, agriculture, and retail—taking the hardest hits.

Similar dynamics could unfold in 2025. If the U.S. maintains or escalates tariffs, markets will likely react negatively, especially in import-heavy industries like autos, semiconductors, and consumer goods. However, if the administration signals willingness to negotiate or selectively remove tariffs, stocks could stabilize as trade uncertainty diminishes.

Projected Market Scenarios for 2025

Based on historical patterns and current policy directions, three potential market trajectories emerge:

Best-Case Scenario (+10% S&P 500 growth): Partial tariff rollback, inflation stabilizes, and earnings growth remains strong. Markets rally as trade fears subside.
Moderate-Case Scenario (+3% S&P 500 growth): Tariffs remain, but minor exemptions ease supply chain disruptions. Market performance remains modest.
Worst-Case Scenario (-15% S&P 500 decline): Trade war escalates, inflation surges, and Fed policy remains tight. Stocks tumble as economic uncertainty rises.

For businesses, the next 6-12 months are critical. Importers should negotiate supplier contracts, seek alternative sources, and monitor tariff exemption opportunities. Investors should hedge exposure to trade-sensitive sectors while considering companies with strong domestic supply chains.

Conclusion: What’s the Most Likely Outcome?

While the tariff battle of 2025 is still unfolding, one thing is clear: markets hate uncertainty, and trade wars historically lead to short-term losses before negotiations eventually bring stabilization. The most probable scenario based on game theory is that tariffs will remain in place for the next 6-12 months, causing economic and market turbulence, but selective reductions and trade agreements will follow within 12-18 months.

The key takeaway for businesses and investors? Prepare for volatility, explore supply chain alternatives, and watch for diplomatic signals that could indicate a turning point in this economic chess match.

Credits

This article was developed through a collaborative effort between Landon Phillips, MBA, and ChatGPT using the Chat4o engine. This work reflects a shared exploration of economic dynamics in response to global trade policies.

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

Market Update 1.25.25

It’s been a while since we posted a market update. The end of 2024 brought a market pullback that we view as a normal part of healthy growth. During that period, we observed several minor gains and losses within an overall medium-term bearish trend. At the time, our model projected an 85% chance of positive returns over 14, 21, and 28-day horizons. While the shorter-term projections did not materialize, as of Friday’s close, the market is now aligned with the previously published 28-day target.

This serves as an important reminder that 85% is not 100%. Even though our model performs very well, it is not perfect (and no model is). As such, we must always account for potential inaccuracies when constructing our portfolios.

Looking ahead to the coming trading days, our model suggests that moderate gains are probable for the tracked indices over the next seven days. However, we cannot entirely dismiss the possibility that a short-term peak has already occurred. The probability of positive return remains below our nominal threshold, indicating that market bulls may be fatigued and vulnerable to a short-term bearish reversal.

Landon Phillips 12/14/24 Landon Phillips 12/14/24

Weekly Update + Market Alert

In last week’s update, we noted potential downside risks in the market, which materialized for both DIA and SPY. However, QQQ ended the week with a positive week-over-week gain. Our price targets remained well within the acceptable criteria for the quant model, and most notably, the model was exceptionally accurate for SPY, predicting a value of 604.77 compared to an actual result of 604.21.

Looking ahead to next week, our quant model indicates an increased likelihood of positive returns. The model shows a 71% probability of positive returns for DIA and SPY over the next 7 days. For QQQ, the probability is 54.1% over 7 days, rising substantially to 85% over a 14-day horizon. Given the recent run-up in QQQ, this projection aligns with broader market dynamics. Based on these probabilities, we are issuing a bullish entry window alert at this time. While some downside risks remain, the historical performance of these indices under similar conditions suggests a short- to medium-term bullish turn is likely in the coming week.

Landon Phillips 12/7/24 Landon Phillips 12/7/24

Weekly Update 12.7.24

In last week’s update, we observed signs of early market exhaustion, though there remained potential for moderate gains. Over the course of the trading week, the QQQ and SPY indices moved higher, while the DIA experienced a slight decline. This performance aligns broadly with our model’s expectations, particularly regarding the “probability of positive return” metric. This metric indicated a neutral to slightly negative probability relative to our baseline or “nominal” market probability.

We believe this tool provides valuable insights for assessing medium-term risk tolerance within a portfolio. When the market’s probability is neutral or slightly below the nominal baseline, we aim to construct portfolios that balance the opportunity to capture slight gains with protective measures to mitigate potential downside risks.

Looking ahead to next week, our quant model continues to produce similar outputs. While the probability of positive returns remains subdued, we cannot rule out the possibility of a sudden, sharp downward move in the markets, as certain vulnerabilities persist in our model’s data.

Landon Phillips 12/1/24 Landon Phillips 12/1/24

Weekly Update 12.1.24

In last week’s update, we noted an unusual bullish wave occurring at an unexpected point in our signal’s historical cycle. While this deviation was unprecedented, it turned out to be a favorable opportunity for those positioned bullishly in the market. This serves as a reminder that no model is flawless, and the possibility of model errors must always be accounted for when constructing a portfolio.

Looking ahead to next week, our model suggests a reduced probability of positive returns. The nominal probability of positive return is approximately 63% (as indicated by the dashed line on the chart), reflecting a long-term trend of positive returns in the market. This baseline probability slightly exceeds a 50/50 scenario due to historical market behavior. However, our quantitative model places the probability of positive returns in the 50% range for the tracked indices, signaling caution for bullish market participants. We are observing signs of early fatigue in the current market wave. If the market continues higher, the model projects modest gains in the range of 1% to 1.4%.

Landon Phillips 11/23/24 Landon Phillips 11/23/24

Weekly Update 11.23.24

This week the market made an unexpected and unpredicted pivot upward. Our signal did not achieve any of it’s historic indications of a pivot, so we cannot endorse this pivot as “high probability.” A market pivot at this point has not happened in the last 12 months. Therefore, we are not going to publish a forecast this week. We will watch next week and see if this bullish wave holds up, or it it turns out to be a bull trap. More to come!

Landon Phillips 11/16/24 Landon Phillips 11/16/24

Weekly Update 11.15.24

In last week’s update, we highlighted the potential for market exhaustion during this week. On Tuesday, we issued a market alert indicating that our model had identified exhaustion for the current wave. Following that alert, the market did, in fact, trend lower, closing out the week with a decline on Friday.

Looking ahead to next week, our model suggests that market momentum remains biased to the downside. At this time, we do not have any indications of a high-probability bullish entry point for the medium term. Should the signal or quantitative model show a significant shift during the week, we will issue a mid-week alert.

Disclaimer: The information provided 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 involve risk, including the potential loss of principal. Historical data and model-based projections do not guarantee future performance. Please consult a licensed financial professional before making any investment decisions.

Landon Phillips 11/12/24 Landon Phillips 11/12/24

Market Alert: Exhaustion

Today our signal detected market exhaustion following the major run-up following the election. Our AI quant model (shown below) now indicates a higher probability for market stagnation or decline over the coming days.

Landon Phillips 11/9/24 Landon Phillips 11/9/24

Weekly Market Update 11.9.24

This week’s market activity aligned closely with our projections from last weekend. We identified the beginning of a market pivot, anticipated some additional downside leading up to the election, and expected a highly responsive market following the election outcome. With the signal positioned to support significant upside momentum, the market reacted strongly once election certainty was established, resulting in a substantial upward move.

Looking ahead to next week, our model suggests that the likelihood of large upside moves has diminished. However, there remains potential for continued gains, though at a more moderate pace. If we observe signs of market exhaustion within this trend, we will issue a mid-week alert.

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 align with your financial goals or risk tolerance. All investments involve risk, including the potential loss of principal. Historical data and model-based projections do not guarantee future performance. Please consult a licensed financial professional before making any investment decisions.

Landon Phillips 11/2/24 Landon Phillips 11/2/24

Market Alert: High Probability Pivot In Progress

This week’s market activity offered some fascinating dynamics. I anticipated a mid-week pivot, and at one point, it looked like the market might turn in advance of typical entry signals. However, by Friday, the market and our signal ultimately aligned, resulting in a more standard entry signal. Interestingly, our three tracked indices closed the week within just a few dollars of the projections published last Friday, reinforcing confidence in the model’s validity.

Currently, the model's outputs are indicating the start of a high-probability entry window. As shown in the table and charts below, there’s an 85.7% probability of a positive return over the next 14-day period. It’s worth noting that there could still be some downward movement as this window begins. Additionally, with the U.S. presidential election on Tuesday—one of the year’s most significant events—market dynamics could be particularly responsive. While some analysts on Bloomberg TV mentioned that markets appear to be pricing in a Republican win, it’s important to remember that our model operates independently of news events; it’s designed to focus purely on historical data patterns. Thus, regardless of the election outcome, the current setup suggests the potential for continued market upside in the days and weeks ahead.

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 align with your financial goals or risk tolerance. All investments carry risk, including the potential loss of principal. Historical data and model-based projections do not guarantee future performance. Please consult a licensed financial professional before making any investment decisions.

Landon Phillips 10/26/24 Landon Phillips 10/26/24

Market Update 10.26.24

This week, we observed an early-week exhaustion pivot that altered our initial forecast from last weekend. Although the final outcomes remained within one standard deviation of our projections, the week’s actual performance diverged from Saturday’s model. In hindsight, a mid-week model update would have better reflected this pivot.

Recently, we’ve noticed a shift in the signal’s pattern, with an increased frequency of entry and exhaustion points, alongside shorter duration windows. This pattern shift brings both advantages and challenges: while it may present more opportunities for high-probability entries, the shorter windows may also reflect reduced market conviction. Trading volumes for major ETFs we track appear slightly lower than in previous months, which could be attributed to traders awaiting more clarity on economic policy with the election approaching.

Looking to next week, the signal currently indicates a potential mid-week pivot toward a high-probability bullish entry for a medium-term position. At the current rate of change, this pivot may occur within a couple of trading days. We may also see some correction in the Nasdaq 100, following patterns observed in other indices.

Once the pivot occurs, I will publish an updated model reflecting the anticipated directional shift. For now, I’ve highlighted the 7-day forecast lines below, as they are the most relevant at this stage.

Disclaimer: The information provided 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 involve risk, including potential principal loss. Historical data and model-based projections do not guarantee future performance. Please consult a licensed financial professional before making any investment decisions.

Landon Phillips 10/22/24 Landon Phillips 10/22/24

Market Alert.. Exhaustion Reached

Our signal started showing signs of early exhaustion last week, and this week it has confirmed medium term equity market exhaustion. More to follow in our weekend update.

Landon Phillips 10/19/24 Landon Phillips 10/19/24

Market update 10.19.24

This week’s market performance closely aligned with our model’s projections, which were published last weekend. DIA closed at 432.64 compared to our projected 433.47. SPY finished the week at 584.59, slightly below the projection of 584.79. Lastly, QQQ ended at 497.47, just under the expected 500.25. Overall, the model continues to show strong accuracy.

Based on the projected outcomes shown in the table and charts below, the data suggests that the bullish trend may continue. However, we are seeing early signs of exhaustion in the underlying signal. Large gains in the coming days and weeks seem unlikely. Instead, we anticipate a steady, gradual movement higher with fluctuations along the way. Should there be any significant changes in the signal’s direction or quality, we will issue an alert.

Landon Phillips 10/12/24 Landon Phillips 10/12/24

Market Pivot in Progress 10.12.24

This week’s market performance aligned with our expectations, with a couple of down days that helped generate our entry signal. I noted this signal on Instagram (@RedOakQuant) on October 9th, which marked the beginning of a high-probability entry window. Typically, our windows last several trading days, but this one seems to be closing quickly, and Monday is likely the final day.

Please note that while the maximum return window may have passed, there may still be opportunities for profitable trades. However, the data indicates that the potential for maximum gains has diminished. Based on historical performance models (as detailed in the table below), the data suggests there could be further upward momentum in the market over the coming weeks. Historically, we’ve seen a pattern of several strong days with 1% or greater gains, followed by a period of slower growth until the market reaches exhaustion.

It’s important to recognize that these insights are based on historical trends and models, which do not guarantee future performance. While the data suggests a higher probability of continued market gains, outcomes can always deviate from the expected pattern. Markets can reverse or experience volatility, even after favorable entry signals, although such a reversal does not appear likely in this specific situation.

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.