NASDAQ Remains in Mean Regressive State

The Bifurcation Parameter for the NASDAQ Composite Index slipped back to -22% over the past few weeks (white arrow on the chart). Figure 1 summarizes the average daily return expected from each of the four key market states expected from the Bifurcation Parameter (and prior day return, R(0)).

NASDAQ Composite Index Returns for States Predicted by the NASDAQ Bifurcation Parameter (click on chart to enlarge)

The statistical significance of each state is based on a comparison with the efficient state (when -10% < BP < +10%). The statistical significance of the Crisis Market State is questionable at p = 0.1 which is below the 95% confidence level benchmark and approximately the same as found for the Dow Industrial as briefed in Zurich and shown on the briefing slides for that talk. In contrast, the Bull and Bear states are both highly statistically significant. For the Zurich talk, daily returns were annualized and the t-test was based on comparing each state with the buy and hold benchmark (as opposed to the efficient market state).