The Reduction Reports and associated analytics are unbiased, data-driven research products that serve as the ultimate companion to traders, investors, producers, and anyone involved in the financial markets. Each daily report provides the results of a rigorous quantitative analysis of the fundamentals, technicals, and other market driving factors, reduced to an easily digestible, one-page summary.
Complex market dynamics are expressed through five core concepts: Fair Value, Factors, Drivers, Risk, and Technical Analysis. Featured in the center of each report is the Reduction Indicator (RI), which provides an "all things considered" indication of bearishness/bullishness through one simple, dynamically colored, 0-10 indicator.
Designed by a trader and fund manager, the Reports provide a definitive edge through actionable analytics with a focus on practicality and the empirical drivers of each asset’s price formation. Whether you are a technical trader looking to ground yourself in the fundamentals, a seasoned fundamental analyst looking to supplement or cross-reference your existing research, a portfolio manager seeking concise daily market summaries, or a producer looking for a quality market analysis to time your sales and hedges, you will find value here. Simply put, the Reduction Reports empower you to make better trades, better decisions, and better use of your time.
Fair Value: What’s the “Right” Price?
Everyone involved in the markets knows “fair value” is an ambiguous term: difficult to define, and even more difficult to assess. While markets and price formation are by no means an exact science, the Reduction Reports arm you with the tools to identify fundamental price dislocations (see Example) and make well-informed decisions about the market’s behavior. Is the recent price spike consistent with the fundamentals or is the market simply over-reacting to the latest headlines?
Through rigorous research and quantitative modeling, the Reduction Reports provide you with simple, dynamically colored, 0-10 indicators to quickly gauge each asset’s current value using a variety of metrics. These indicators are accompanied by actual price levels implied by each metric, allowing you to anchor the fundamentals to an expected price. In one glance, you are able to assess “fair value” through complex multi-factor models, relative value models, sector-specific models, and more. Further, you have access to 1, 3, 6, and 12-month momentum indicators derived from these models to determine towards which direction fundamentals are driving the market.
Factors: What Explains the Price?
Following the financial media, you’ll often come across a myriad of explanations for why an asset’s price is high or low or why it recently moved up or down. These explanations are typically contextually useful, but quantitatively vague. The Reduction Reports bridge this gap. Each asset is decomposed into eight or fewer price-driving factors (e.g. currency rates, inventories, sentiment). Each factor is quantified, standardized, and reduced to simple, dynamically colored, 0-10 indicators to gauge both its current level/strength and its 1, 3, 6, and 12-month momentums. The Reports also include color-coded charts and an array of statistics for each factor, allowing you to dive even deeper where desired.
Drivers: What’s the Market Paying Attention To?
While the models and factors discussed above do an excellent job of explaining price movements over time, the market is not always so clean and obedient and often changes its focus. The Reduction Reports include indicators that provide you with insight into which factors the market is focusing on in the short and medium term as well. Further, the Reports identify which valuation models have been best tracking the asset’s price in the short/medium term, shedding more light on the current driving forces behind the market.
Risk: What Could Happen to the Price?
Risk is inherently uncomfortable, but it doesn’t have to be unwieldy. Through a variety of factor-level risk metrics, you can quickly assess the asset’s price sensitivity to each factor, each factor’s overall impact on the asset’s price variation, the propensity of each factor to exhibit extreme levels, and more. Beyond simple risk management, these metrics also enable you to engage in complex scenario analyses. Further, several indicators of factor and asset-level volatility provide you with measures to assess risk across multiple time frames.
Technical Analysis: What’s the Market Telling You?
Price action is the market’s voice, and the Reduction Reports are your personal translator. While fundamentals may serve well as the long-term drivers of the market, oftentimes the market does not fully cooperate with them in the short term, as traders and short-term flows dominate the price action. Through a suite of technical indicators, charts, and features, the Reduction Reports provide extensive insight into the technical story the market is telling. Metrics included reveal momentum/trend strength, market environment identification, range/support/resistance levels, volatility, and more. Indicators are logically designed and dynamically colored to facilitate quick assessment and easily comparable analyses across assets.
Analytics: Dive into the Data
All of the aforementioned highlights speak to the power of the Reduction Reports’ reduction of a vast amount of data and analysis down to a manageable, easily digestible, one-page summary. For those that wish to dig deeper or incorporate the analytics into their own analyses, a full daily time series history of many of the Reports’ analytics is available to you. The data is delivered in an easily-consumable/code-friendly format that can be seamlessly loaded into Excel or through any standard data retrieval process.
Reduction Indicator: All Things Considered
As mentioned above and in the spirit of the reduction principle, the analytics of the Reduction Reports are reduced even further through the Reduction Indicator (RI). Through another layer of proprietary analytics, the RI provides an all-encompassing bearishness/bullishness score of the market reduced to a simple (say it with me), dynamically colored, 0-10 indicator. If used as an explicit trading signal, the RI is demonstrably effective in producing abnormally consistent, positive returns, and with access to the historical data, you do not have to take my word for it, as you are free to test for yourself.
This summary broadly touches on the some of the primary features of the Reduction Reports, and as you familiarize yourself with the included tools, you will find there is even more available to you. Meticulous attention is paid to detail and functionality throughout the Reports so that you can access and process the information relevant to you as quickly and efficiently as possible. Color schemes are judiciously designed to allow you to quickly scan to and connect related features of the report. Factor names and colors are standardized across assets and sectors wherever possible, enabling you to make further connections in your analyses of multiple assets.
With an active trader at the helm, the markets, the Reduction Reports, and the underlying models and analytics are always being monitored, tweaked, and updated to incorporate new developments and data sources, enhance features and functionality, and innovate wherever possible.