Investing and trading algorithms
developed by Michael Markowski, 2001 to 2020
Since 2001, when Michael Markowski was the director of research for StockDiagnostics.com (for review see Barron’s June 3, 2002) he has been developing algorithms. The common denominator for each of his algorithms is that each evolved from Michael’s empirical research of extraordinarily negative stock market anomaly events.
- SCPA (Statistical Crash Probability Analyses). The SCPA was developed from Michael Markowski’s findings from his empirical research of all notable stock market crashes from 1901 through 2018 during March of 2020. The impetus for Michael to conduct his research was because the stock markets of the US, Canada, Japan, Germany, South Korea, France, Brazil, Spain and Australia began to simultaneously crash on February 21, 2020.
The SCPA operates similarly to the algorithms which are used by meteorologists to forecast the intensity and the pathology for a hurricane. The SCPA which also powers CashTracker.com does the following:
- Monitors for initial market corrections to determine which have the potential to become crashes
- Measures crash intensity
- Categorizes crashes by levels of intensity
- After a crash has begun the SCPA forecasts the following:
i) post initial correction highs
ii) interim lows and highs on way to final bottom
iii) percentage changes for interim declines
iv) date range for final bottom
v) percentage decline at bottom
The SCPA is a significant breakthrough for all investors. The potential for a market to crash, for a correction to become a crash, a crash’s intensity and post-crash events are now forecastable. Instead of riding out crashes, as was similarly the case for hurricanes, investors now and in the future, will know when to get out!
The table below contains the initial forecasts and dates for when forecasts became accurate from March of 2020 and after the SCPA was developed.
- Bull & Bear Tracker (BBT). This algorithm was originally developed in 2016 by Michael Markowski to predict market crashes due to his concerns about negative interest rates causing a crash of the world’s markets. To develop the predictive crash algorithm which predicted the Brexit market crash in June 2016, Mr. Markowski researched the crash of 2008 and the bursting of the dotcom bubble in 2000. After Donald Trump was elected as US President interest rates increased significantly the algorithm was mothballed. When President Trump’s instituting of tariffs caused the markets to crash in 2018, the algorithm was brought out of retirement. It was converted to trend trade S&P 500 short and long ETFs.
Even though the Bull & Bear Tracker precisely predicted the October 2018 correction that resulted in a 20% decline from the 2018 high, Mr. Markowski reclassified it from a crash forecaster to a trend trader in 2020. Mr. Markowski’s findings from his subsequent research of additional notable market crashes in 2020, including the crash of 1929 led to:
- His being able to distinguish a market correction from a market crash. See “Difference between market corrections and crashes”, April 7, 2020
- Development of the SCPA algorithm.
The Bull & Bear Tracker and the SCPA (Statistical Crash Probability Analyses) are very complementary. Both predicted the February 21, 2020, corrections and the March 23, 2020, interim bottoms for the markets of nine countries including the US. The BBT is analogous to a shotgun and the SCPA, a rifle.
- The EPS Syndrome. This algorithm was developed in 2002 and was used by Mr. Markowski to predict the demise of Lehman, Bear Stearns and Merrill Lynch, etc., in his September 2007 magazine article. See “Have Wall Street’s Brokers Been Pigging Out?”, September 2007. See Negative Cash Flow Research page at BullsNBears.com. For performance of algorithm and video go to Perfect Shorts product page.
- Free Cash Flow Yield. This algorithm was developed in 2003 and was used by Mr. Markowski to find two of the most undervalued companies in the market based on their Free Cash Yields. The share prices of both companies multiplied by 20 times. The video “What is a 50% Free Cash Yield” on the Startups and microcaps research page at BullsNBears.com is highly recommended because it explains the methodology that Mr. Markowski uses to develop algorithms.
- OPS Ratings. This algorithm which was developed by Mr. Markowski in 2002 monitors and rates the operational-cashflow per share (OPS) for all publicly held companies. The algorithm automatically calculates the OPS for a company and assigns it one of eight numerical (1 through 8) ratings. The companies with the lowest OPS ranking of “1” have the lowest risk. Conversely, those assigned an “8” have the highest risk. The chart below depicts that separate portfolios containing all of the OPS 1, 2, and 3 Rated companies outperformed the S&P 500 from 2002 to 2010.
For key articles by the financial media about Mr. Markowski and by him pertaining to the accurate predictions that he made from utilizing his algorithms click here