SCPA algorithm

The SCPA (Statistical Crash Probability Analyses) algorithm was developed in March of 2020 from the empirical research of all stock market crashes from 1901 through 2018.

The impetus to conduct the research was the market crashes which simultaneously occurred for 13 of the world’s largest countries ranked by GDP from February 21, 2020 to March 23, 2020.   The markets for all 13 countries including the US, Canada, Germany and Japan had reached all-time high or multi-years from January 1, 2020 to February 20, 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 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.

The SCPA algorithm is forecasting a 300% cumulative gain from March 2020 to fourth quarter of 2022 from utilizing inverse ETFs to buy at the peaks and sell at the troughs during journey to final bottom.   The forecast is based on 100 years of empirical data including Dow 1929-1932 and NASDAQ 2000-2002 market crashes.  All of the 2020 crashes for the markets of the 13 countries share the genealogy of the 1929-32 and 2000-02 crashes.  Each provided short selling gains of 317% and 319% as depicted in the charts below. 

Based on the 34% decline threshold being met on March 18, 2020, the SCPA has forecasted the following for all 13 of the markets:

  • 30 to 32 month declines to final Q4 2022 bottoms
  • 79% to 89% declines from 2020 highs at bottoms
  • Gains of 300% from a trading short index ETFs from the peaks to the valleys during journeys to the final bottoms
  • Post-crash high date before journey to final bottom as early as June 24, 2020 to as late as September 18, 2020.  
  • Post-crash highs to within 17% of 2020 highs.      

The SCPA and the Bull & Bear Tracker (BBT) algorithms are very complementary.  The Bull & Bear Tracker also predicted the February 21, 2020, correction and the March 23, 2020, crash bottom for the markets of 13 countries including the US.  The BBT is analogous to a shotgun and the SCPA, a rifle.  See about Bull & Bear Tracker.