Hi YXI friends,

I hope you enjoyed the Multi-model Signals upgrade earlier today. Here, I want to share a couple of thoughts on how the service evolves going forward - what we are leaning into and also going to leave behind.

1) Signals Analysis

Every day, we already share the results of whether the machine thinks something is bullish or bearish, with commentary using the top features and our model outputs. However, what differentiates our flagship service is the additional judgement-based analysis of the patterns and trends the machine identifies. There will be more on this over time, as I establish a framework around it.

2) Fundamentals Analysis

The usefulness of fundamental analysis to the individual depends on their timeline. Price moves much faster than fundamentals, so short-term traders rightly focus on price technicals and algos. However, to form a coherent long-term view, one absolutely needs to understand not just the fundamentals of the companies they hold, but also the bigger picture across industries.

Personally, my time horizon has evolved to longer-term focused. Fundamentals are taking centre stage in what I want to hold, while MS signals and price technicals are used more as risk-management tools.

3) Technical Analysis

I will start to scale back the complexity of the TA I use, e.g., by trying to establish the EWT wave analysis of every move since 1990. This is because we already have much more sophisticated, unbiased tools that incorporate AI/ML signals and account for a wide range of technical factors. It would be like trying to add bicycle wheels to a Ferrari.

The problem with the likes of Elliott Waves Theory is that it’s a pre-determined toolset that requires us to overfit live patterns into a framework established over 100 years ago (literally). While it accounts for crowd psychology, it doesn’t fully capture the continuous earnings growth in equities, which is why the stock market is always up in the long run, despite intra-year volatilities and occasional large drawdowns. It is too tempting to call the tops and bottoms using EWT, which can be extremely ineffective in a strong trending market.

We can take the most useful part of the modern EWT (using Fib extensions to measure the length of one rally vs the previous rally to gauge momentum) and use it alongside the most well-established and widely followed tools, such as volume, price channels, and trendlines. I genuinely don’t think we need much more than that for risk management.

If you really enjoyed the EWT analysis, my apologies in advance. I believe this is an important progression we're making, even if it feels “backwards,” because the chart has fewer numbers and letters.

4) Top YXI Picks

Over the next quarter, I will begin establishing the “Top Picks” across our universe, which will incorporate fundamentals, multi-model signals, and technicals to support risk management. This may just be the most important development for this service from a judgment-based perspective.

For the fundamental analysis, I will focus more on the “Top Picks” rather than mechanically going through every name, which saves everyone time on reading or writing.

However, this will require a lot of background work - onboarding new tickers to our MS signals and combing through fundamentals. Please do expect periods of quiet from me as I focus on this.

DISCLAIMER: This newsletter is intended for educational purposes only. Any information or analysis in this note does not constitute an offer to sell or a solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice, nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

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