Kudos to MMs
- Thread starter nitro
- Start date
Well, what I have noticed is that they almost always diverge when SPX goes higher, but the two go lower mostly coincidently (that could be the result of massive liquidity driven markets at this point. Higher is almost always based on optimism rather than cold hard facts). A key question is how often does "NFV" converge towards SPX, and how often does NFV follow SPX. For example, here "NFV" is 1163.76 and SPX is $1171.05. That is still within the realm of "efficient", since seven handles is not enough edge.
It is still too early to tell how useful it is. Some people will tell you that you constantly have to adapt your signals since the market is schizophrenic and is constantly shifting what it deems important. I honestly believe that NFV has captured something fundamental about markets, and that if I went back and tested it ten, twenty or thirty years ago, I would find that it is useful over very large time frames. In other words, the difference between SPX and NFV is stationary, which is extremely useful statistical property.
Another way that NFV can be used is indirectly. For example, say you have three systems, A does well in strong trending markets, B does well in mean reverting markets, and C is a system that outputs the best symbols to have together in a portfolio. If NFV can be used to allocate resources by weighting a system more than another given that it has some predictive value into the regime the market is in on say weekly to monthly time frames, this could be fantastically useful to a short term hedge fund/trader.
Is it useful to the typical ET trader that wants to take $1k to $100k in three days? Almost certainly not. It is at best a "swing" type indicator at this point.