- EXCLUSIVE - As it was discussed many time, the hedge signal has a special restrictive mode that is activated once the Nasdaq close under 20%. This mode is an acknowledgement that when we enter a bear market, the usual hedge/unhedge signal we are normally following doesn’t work very well anymore. As example, my phase angle threshold that are usually set in a way to avoid B bounce, start to trig on deadcat bounce. In other words, the market behave very differently. Fun fact is, since some corrections has bounced exactly at the 20% line like in 2018, I tried to play with that bear market definition by activating that mode at 21-22-23-24-25% line but the optimal threshold was always by activating it at 20%. My conclusion is : it’s somehow a self-fulfilled prophecy : when we start to talk and hear on the news about bear market by the historic but arbitrary definition of 20%, people start to behave like bear market investors. Anyway, let’s go back to the important point today: what the algo is looking at to unhedge ?
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