|Quick Look Interpretation for |
Event Horizon Index
|35||First Yellow Flag (perhaps begin reducing portfolio risk)|
|65||Second more serious Yellow Flag (should be reducing portfolio risk)|
|90||First Red Flag (reduce portfolio risk)|
|100||Major Red Flag. The current crisis has reached the Event Horizon. The "Event" is now "more" likely to occur than to be avoided (not too late to reduce risk now, but don't wait any longer)|
The EZX is 100% based on quantitative probabilities of moving averages of the VIX and the SP500 providing Warren Financial and other investors with a "reading" that gauges the likelihood of an economic disaster occurring in the near future (next 30 days).
EZX has proven to be a good predictor of the market.
View the full historical details of each time the EZX has hit 100 since 1998.
View the full historical details of each time the EZX has hit 90 since 1998.
Historically from 1998 to present
Each time EZX hit 100 if you sold SP500 you saved 6.92% over the next 5 trading days.
Each time EZX hit 100 if you sold SP500 you saved 10.31% over the next 20 trading days.
Each time EZX hit 90 if you sold SP500 you saved 4.48% over the next 5 trading days.
Each time EZX hit 90 if you sold SP500 you saved 7.39% over the next 20 trading days.
For a more detailed explanation of the Event Horizon Index, click on the link to the June 27th Forbes article: Should You Be Worried About Europe's Train Wreck?
This following is a chart of a backtest. The SP500 from Jan 1 2007 through Dec 31, 2012 was nearly flat. But if you hedged the SP500 by following the signals of the EZX, the return is 40%+ better than the SP500 alone. The hedge is the same one used by WFS in the Big Dividend Hedge Strategy and described elsewhere on this website (options on VIX futures following signals from EZX). The backtest is entirely programatic (no human decisions). Because the goal of the hedge is to remove "black swan" or "fat tails" from equity investing, the hedge is appropriate for any equity portfolio including mutual fund portfolios, charity portfolios, endowment portfolios, pension portfolios, high net worth portfolios, etc.
Below is a chart of the Event Horizon Index's recent history.
|Date||SP500 1-day %change||Event Horizon Index Reading|
|5/30||-1.43%||35 up to 65|
|6/1||-2.46%||65 up to 90|
|6/4||+0.01%||90 down to 35|
|6/19||+0.98%||35 down to 0|
|6/21||-2.23||0 up to 35|
|6/29||+2.49%||35 down to 0|
|10/19||-1.66%||0 up to 35|
|10/23||-1.44%||35 up to 65|
|10/25||-0.31%||65 down to 35|
|12/7||0.29%||35 down to 0|