AroniSmartInvest™ and AroniSmartIntelligence™ in Action: Analysis of Volatility of Stock Market Indices, Gold and Oil in Mid-November 2022

AroniSmartIntelligence Stock Market Indices Dominance Analysis

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Since the beginning of the year, the stock market has been on a rollercoaster. The main drivers have been inflation, Federal Reserve interest rates actions, international politics, including the war in Ukraine and the dynamics in the Chinese economy and the US economiic policies.  In Q4 2022, the stocks rose, in anticipation of a softening inflation following the rise in interest rates, some positive earnings ahead and softening worries of recession.  But the volatility remains, driven by continued worries of recession and recent dynamics in tech companiies, including layoffs. The S&P 500, DOW, NASDAQ, Russell 2000, Crude Oil, Gold all have been impacted and went though major volatilities. Hence, the picture of the year  until  November 18, 2022 has been historic: a widespread volatility after a fueled momentum over 2021. As highlighted in several analyses, major questions coming from investors  and users leveraging AroniSmartIntelligence™ and AroniSmartInvest™ capabilities remain focused on the findings from exploring the connection among the key Stock market indices, especially NASDAQ vs Dow Jones(DJI), S&P 500, Russell 2000, Gold, and Oil and generating some meaningful trends. Based on these questions,  AroniSmart™ team, has continued to leverage the advanced analytics tools to analyze the trends of the key  market indices.  The key findings are  captured in this article.

The performance over  2022 has significantly been impacted by the Federal Reserve's latest monetary policy regarding inflation, the continued uncertainty on the Chinese economic policies, worries of recession, Ukraine war and, somewhat, the impact of the COVID-19 pandemic new variants. At the beginning of the year, Economists and most major banks expected the Federal Reserve to  raise  rates,  by a quarter-point,  five times  to seven times this year.  So far, the interest rate has been raised six times, from 0.25% to 4.00%, with the 75point raise in early November 2022  marking a sixth consecutive rate hike and the fourth straight three-quarter point increase and pushing borrowing costs to a new high since 2008.  The Federal Reserve is still widely expected to raise the target range for the federal funds rate  in the next meeting but by smaller steps.

AroniSmart™ team, leveraging the Machine Learning Time Series capabilities, including Support Vector Machine,  and Neural Network Analysis of AroniSmartIntelligence™ ,  has analyzed the trends of  key  stock market indices (DJI, NASDAQ,  S&P 500, Russell 2000, Oil, Gold)  between  mid Nov 2021 and  mid Nov 2022 and came up with insights and  projections on the dynamics.  

The insights are presented below (for disclaimer and terms, check AroniSoft website. For related analyses of Stock Markets using Time Series, Dominance Analysis, and Neural Network capabilities see here .

The analysis produced the different measures of forecasting accuracy, including  directional accuracy of Stock market indices. Directional accuracy is an important statistic when ones tries to look at the prediction of a given stock market indice  vs others, for example, as in this case, the  NASDAQ , S&P500, or DJI Adjusted Closing Price as a function of Open, Low, High, and Closing Prices and volume  of other  stock market indices, Gold, and Oil.   There was also good insights from Dominance analyses that was performed to see whether there are major connections  among indices, assuming investors are moving from some market indices to others, especially from tech dominated  NASDAQ to DJI, or from stocks to Gold and Oil.

A little bit of the usual investment research before coming back to AroniSmart™'s findings.

Indices Momentum and Downward Trend

In general all indices have experienced an upward momentum  over 2021 and to January 7, 2022: Dow Jones (.DJI) had grown by 16.84% to 36,231.66; S&P 500  (.INX) by 23.09% to 4,677.03;  Nasdaq Composite (.IXIC) by 14.57% to 14,935.90; Russell 2000 Index (RUT) by 4.25% to 2,179.84, Crude Oil by 50.7% to 78.95 and Gold by -1.93% to 1,794.00

Since then, year-to-date (YTD) by  November 18, 2022, the stock indices have experienced very poor performance and  have been significantly down.  The downward trends have appeared to reverse in late Q1 and Q3 2022 but the market went back to high volatility, swinging between the opening and the closing of the market. Since early Q4 2022, the market has started to come back. In fact, starting with the second week of January 2022 to November 2022, all stock indices have decreased significantly and as of to date the performace is negative across the board with the following decrease by index:   Dow Jones (.DJI):  -5.22%; S&P 500  (.INX):  -10.52%;  Nasdaq Composite (.IXIC): -17.77%; Russell 2000 Index (RUT): -5.86%, Crude Oil: -1.09% and Gold: -0.62%.

The perforrmance YTD is even worse, except for Crude Oil, with:  S&P 500: -16.80%; NASDAQ: -28.76%; DOW Jones: -7.1%; Russell 2000: -17.62%;  Crude Oil: +6.48% ; Gold: -1.94%. 

In the same time the Treasury Yield 10 Years (^TNX) has increased by a whopping 178.7%, as the Federal Reserve continued to  raise  rates.

Hence, the dynamics of all the stock indices appear aligned, with minor differential trends. All the indices, except Crude Oil and Gold,  have been behaving similarly. This finding may suggest that the growing inflation, the worries of recession and the expected Federal Reserve economic policies have been the major drivers of the market, while the impact of various sectors and the specific composition of the different indices played a minor role. Another finding remains that, YTD, value stocks appear to have, relatively, performed better than growth stocks.

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Similar Trends with  Differential Nuances.

AroniSmart™ team  analyzed  stock indices performance dynamics, leveraging the  Econometrics and Time Series Support Vector Machine  and  Neural Network Multilayer Perceptron  capabilities  of  AroniSmartIntelligence™ and Machine Learning and Sentiment Analysis of AroniSmartInvest™. The team uncovered interesting insights, as shown below. The team analyzed the performance of NASDAQ, DJI, S&P500 Adjusted Close vs  Open and High prices of the other indices (DJI, S&P 500, Russell 2000, Crude Oil, and Gold) , and each indice's Adjusted Close vs other indices prices (open, low, high, adjusted close) and volume,  from  November  18, 2021 to November 18,  2022.

From the analysis, it was found that  these indices basically follow similar trends. Also, they are all similarly impacted by the market conditions. However, the analysis found important nuances. 

The key findings highlight:  the indices studied had an upward momentum over most of the period. Trendwise, in late Q2- early Q3 2021, the stocks   reached  high or record  price levels.  Then in September and October, 2021, the dynamics pointed to a slow down, downward trends, seesaw movements, and there were major speculations about a potential correction. The volatility increased in Q4 2021. In  early January 2022, all indices started giving up some gains and by January 28, 2022, they were significantly down, except for Oil. On January 31, all indices went up vs January 28, 2022.


Stock Indices All Training Data Projection


Figure 1: Key Indice Price Trends - All Indices  in Nov 2021-Nov 2022.

Stock Indices All Training Data Projection


Figure 2: Key Indice Price Trends - Gold and Crude Oil   in Nov 2021-Nov 2022l.

Stock Indices All Test Data Prediction key stocks from November 11 2021 to April 17, 2022

Figure 3: Key Stocks Indices Trends  in April 2022- Nov 2022 -- Dow Jones (DJI) Test Data model.


Stock Indices All TrainingData Prediction


Figure 4: Key Indice Price Trends  in Nov 2021-Nov 2022 -- Dow Jones (DJI) Training Data model.


Over 2022 all the stocks indices built on an earlier momentum, almost following similar trends.  

By July  of 2022  most indices were above the  average Q1 2022 levels. In early Q2 2022,  all indices momentums were significantly impacted by the market conditions. In late May 2022, they bounced back and maintained momentum until late September 2021 (see charts below). Since then, the indices have been experiencing seesaw dynamics.  The new market conditions, including the news about the pandemic have severly impacted all indices since December 2021 into January 2022. As expected, the indices do not exactly follow the same trends and projections, neither in training nor in test data (see DJI and NASDAQ examples below).

DJI Future Estimate key stocks trends  2022 09 18  2022 11 18

Figure 3: Dow Jones (DJI)  Step Estimate  Sep 2022 - Nov 2022


DJI Test Data Prediction Oct 25, 2021-Jan 31, 2022

Figure 5: DJI Stock Market Index Trends and AroniSmart Projections Analysis Between April 2021 and November 2022


DJI Training Future Estimate Nov 18, 2021- August 18, 2022

Figure 5 :DJI Stock Market Index Trends and AroniSmart Future Estimates Analysis Between November 18 2021 and August 2022

AroniSmartIntelligence™ modelling shows the stock indices that  appear to mirror each other: a high opening for  the stock market indices that tends to lead a decline or slow down in  NASDAQ's adjusted closing price and a high opening for  the  stock market indices that tends to lead an increase or growth in  NASDAQ's adjusted closing price.  Late Q4 2020 - Early Q1 2020 and late Q2- early Q3  dynamics appear to positively impact NASDAQ Index, whereas the end of Q3-early Q4 2021 appears to have been challenging.

AroniSmartIntelligence™ analysis, using Time Series Support Vector Machine modelling and Neural Network Multilayer Perceptron,  below, shows the weights of the different indices and the forecast statistics.  From the statistics, directionary accuracy is in general high, pointing to overall similar dynamics across all market indices.

AroniSmartLytics™ Neural Network Analysis  confirms Time Series Support Vector Machine results:  NASDAQ and DJI  momentum negatively impacted in late Q1 2022 - early Q2 2022, and late Q3 2022, generally aligned with the momentum of most of other stock market indices.

AroniSmart™ team  analyzed DJI's performance dynamics using Neural Network Analysis  capabilities  of  AroniSmartIntelligence™ and uncovered  insights confirming the performance dynamics of DJI vs   other market indices  from  November 2021 to November 2022.

See below:

Market Stock Indices Neural Network Analysis - Model 11 18, 2022

 Figure 6-a:  DJI Stock Index Dynamics - AroniSmart Neural Network Analysis Results - Model setup and network  for the Period  Between November 2021 and  November 2022

Market Stock Indices Neural Network Analysis - Weight 11 2022

 Figure 6-b:  DJI Stock Index Dynamics - AroniSmart Neural Network Analysis Results - Weights  for the Period  Between November 2021 and  November 2022

AroniSmartLytics™ Dominance Analysis confirms Support Vector Machine results: Stock Indices  momentum impacted in 2021 and generally aligned with the momentum of most of other stocks.

AroniSmart™ team  analyzed DJI performance dynamics using Dominance Analysis  capabilities  of  AroniSmartIntelligence™ and uncovered  insights confirming the performance dynamics among all the stock market indices, especially DJI vs SP500, NASDAQ, Oil and Gold from November 2021 to November 2022. See below:

DJI Dominance Analysis 11 18 2022


More detailed analyses can be conducted using AroniSmartIntelligence™ Big Data, Machine Learning, Time Series and Sentiment Analysis capabilities.

For  more on AroniSmartIntelligence and AroniSmartInvest capabilities, visit AroniSoft web site by clicking here. AroniSmartInvest™ and AroniSmartIntelligence ™ are available on Apple's App Store.

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