Notice:
  The views and information expressed in this document reflect the opinions and experience of the author Robert C. Pelletier.  Neither CSI nor the author undertake or intend to provide tax advice or trading advice in any market or endorse any outside individual or firm.  All recommendations are provided for their informational value only.  Readers should consult competent financial advisors or outside counsel before making any software purchase or investment decision.  CSI does not stand behind or endorse the products of any outside firms.

Copyright (c) 1998 Commodity Systems Inc. (CSI).  All rights are reserved.

Correlation is the Key to UA's New Studies: Part 1 of 2 The Beneficial Side Effects of Adding Stocks To UA

Correlation is the Key to UA's New Studies: Part 1 of 2
By Steven Davis, CSI Developer

    Up until now, you had to depend on charting software and single series indicators to understand the markets.  Starting with version 1.75 (coming soon), Unfair Advantage® will provide the Multi-Market AnalyzerTM.  This unique study, I developed, summarizes the vast wealth of data available with Unfair Advantage into clear statements about the current market situation.  In a later newsletter, I will explain how the Multi-Market Analyzer works, how the Davis Stretch Index and the Davis Unstretched Indicator work and how they expose trading opportunities.  For now, I wish to show you what Unfair Advantage with the Multi-Market Analyzer can do for you as a trader.

    Suppose that you are wondering what the currencies are going to do.  You enter whatever Stock, Mutual Fund, or Commodity symbols you think are related ("ed dx sp tb jy dm us ffi", in this example) into the Multi-Market Analyzer.  By default, Multi-Market Analyzer uses all of the available data in the form of weekly, detrended Perpetual Contract® data series for each future, but you can choose any series Unfair Advantage offers.  After two minutes, the complete history for eight major markets has been analyzed.  The Multi-Market Analyzer reports that 98% of the price variation can be explained by one underlying factor which validates the market selection and computes the historical misalignment or stretch of the markets relative to this factor.  Furthermore, the Multi-Market Analyzer can create anticipatory indicators for each of the markets.
 

    The Davis Unstretched Indicator shows where the price should be, based on the current values of the other markets and the historical correlation up to that point.  You can see in the above graph that the Davis Unstretched Indicator did a good job of identifying consolidation and trending phases for both up and down trends.  Get Unfair Advantage® and try it out for yourself.

    All users of this and other studies are warned that trading the markets, particularly the futures markets can be fraught with great financial peril and risk.  We ask that all users obtain competent advice before taking market positions because any position can produce substantial financial loss.  CSI charges for and is in the business of providing market data, and any opportunities for profit found through CSI's analysis tools should be considered an extra and added scope benefit for which CSI does not require payment. In our capacity as a data vendor, CSI does not offer advice, but the user may use CSI services, data and software to investigate opportunities, the outcome of which is the customer's sole responsibility.

 
The Beneficial Side-Effects of Adding Stocks to UA

    CSI users who download data with UA may spend a couple of minutes (perhaps slightly more) each day capturing futures information.  Whether access is through the Internet or long-distance phone lines, the result is always a full summary of all futures contracts (for either North American or Full World markets). For several months now, we have been testing the addition of securities to the daily data feed. We believe access to this complete, unabridged database will greatly enhance the trader's view of the economic environment while reducing the labor involved.

Multiplying Your Access Speed

    We have held off on the official release of stocks and funds because, in our view, the speed of access has not been sufficiently quick. To address the speed problem, we programmed and have been testing a new algorithm that reduces the daily download time for every user. Regardless of method of access, the time involved in each update will be cut by 70% or more. The method used is not unlike the technology within UA itself, where vast amounts of data reside in customer files in a fraction of the space required for regular viewing. The procedure involves manipulating CSI's daily data feed in a way that minimizes the size of the transmitted file with no loss in market substance. We believe the release of this software will bring CSI closer to our goal of providing faster transmissions of futures and stock data. Look for this enhancement within the next few months (after further Beta testing) in version 1.750 or higher.

UNFAIR ADVANTAGE--The Data Solution for the Next Millennium

    When the stock database becomes available, it will be possible to reliably view all world markets from one feed, with great control over the area of concentration. With nearly 5,000 users of UA on our books, it appears that this new method of dealing with data represents the way knowledgeable traders prefer to address world markets and trading in general.  The older method of downloading, which involves receiving just those contracts you want to view, without the opportunity to examine other market forces, is a less efficient way of investigating world trading opportunities. If you don't use UA and your neighbor does, you could be at a substantial disadvantage.

    Some potential customers of UA misapprehend the software's use of disk resources. We would like to clarify that UA addresses all the history on just about every market on earth without consuming several gigabytes of valuable disk space. In fact, UA consumes only 50 megabytes or so, which is minimal by today's standards. Had UA been written using standard software technology, perhaps large space consumption would be the norm, but it was designed specifically to provide great functionality with minimal use of hard drive resources. This focus actually contributes to other advantages that pay dividends in quick file distribution and appendage, and speed of operation.

    The addition of domestic and overseas stocks to the CSI Market Statistics (MARSTAT®) database has brought to light the need for more consistent reporting of base currencies in our factsheets. As part of a general overhaul and enhancement of this important documentation, we have begun standardizing all currency symbols for all commodities and stocks according to the table below.
 
 
 

    We have also enhanced the reporting in Unfair Advantage's Alert Calendar by offering information in a number of areas. In addition to first notice days, last trading days and the like, you'll find that the Alert Calendar includes dates of livestock reports, employment figures, building permit reports, etc. UA users receive calendar updates automatically along with your daily downloads. In order to maintain all available information, the calendar is updated every few weeks with information on upcoming events.

    Having a full, unabbreviated database on every user's personal computer eliminates the need to download historical information on the next emerging market opportunity. The data you need is always there to help you address or create the next challenging trading opportunity.