Sample Macro Level Application Of Agathos Vector Analysis
Data for the Swiss market is shown in this example, but similar observations were made in all major markets at the time. Timely warnings of an imminent, significant correction were generated by AVA during the four to six weeks preceding the major correction in equity prices in early 2020. That correction is commonly attributed to the advent of a pandemic caused by the COVID19 virus. In fact, COVID19 was merely the trigger for a correction that would just as easily have been set in motion by any other event. As always, the trigger was unpredicted and unpredictable but the even itself was the logical conclusion of the market constellation preceding it.
The graph shows a market level analysis of quadrant distribution. Tenants of Quadrant I (basing) and Quadrant II (bull phase) haver been lumped together, purely for the sake of simplicity. The monthly (strategic) analysis (left portion of the graph) is shown alongside the weekly analysis (portion to the right).
By June 2019, an overwhelming majority of stocks in the Swiss market were classified as being in a bull phase of varying maturity. As the market kept rising this constellation matured and stocks began to drop out of Quadrant I. For some time, the percentage of stocks classified favourably began to fluctuate, reflecting that indicator had reached levels where comparatively few changes would push marginal differences across stages and quadrants.
As this happened against the background of a rising market index, the markets new peaks had to be seen as being unconfirmed. A gap was forming between what seemed at the surface and what was happening underneath. The market was not nearly as buoyant, or healthy as the index suggested. Clues taken from the weekly analysis (which serves as a leading indicator) became the critical component in assessing market outlook.
During the summer of 2019, the weekly work generally mirrored the favourable impression given by monthly ratings. Moving into December 2019, weekly classifications were becoming more fragile. Initially this ‘only’ confirmed the divergence between a rising market index on the one hand, and diminishing strength on the other that was already evident in monthly analyses.
Then, with most reserves having been exhausted, two sudden drops in favourable classification occurred. In the illustration each of them marked with vertical arrow. The first happened with the change of year. A second one followed only three weeks later. In spite of a partial recovery, the trend of ratings was clearly pointing downwards. By now the market’s condition (as defined by AVA) had become genuinely critical, signalling an urgency to take significant protective measures during late January, in addition to at least initial precautions taken in late December 2019, and/or early January 2020.