Weekly Alpha Review - Mar. 28, 2025
My Journal
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New education section for you on the site (in progress).
[On Entropic quant model] “The signal catches up to the SPX” is what I like to say.
Traders holding S&P500 lost 86 points on the index over entire week which is actually almost flat. Meanwhile our April hedges ended up +65%. Consider that we just had 100 pt sells every day only a few weeks ago. The main entropic model identified a first sell on Wednesday, the ramp up on Thursday morning and again a sell off on Friday.
Highlights
Mon. Mar. 24 commentary:
“Not shorting when model is pointing up. Not buying up here but not shorting just yet.”
“2 Inflection points I want to see. Bottom of the election gap and top of the election gap. These are where we want to see anomalies to give me conviction.”
“We have higher to go. Don’t worry you missed nothing today.”
“Still stabilization towards the close. Not the day to short imo.”
Result
Gap up and drifted up into close. I did not short, you probably got that point.
Below is the picture of the 2 upper inflection points we were preparing for.
Tues. Mar. 25 commentary:
“We've reached our first area of interest I showed you we'd reach. How do we know it's interesting? VVIX and VIX are now responding in this area. If there is a first pullback or consolidation (over time) it would be in this first box. Still waiting on the 2nd box.”
“Everyone is looking at this current level to short which gives us enough fuel to go higher I suspect”.
This is the part I got wrong. After reviewing on Fintwit, I saw everyone was looking at ~5820 instead to short (my second box of interest), which meant only one thing, we would not get there. Hindsight is 20/20 though.
Result
Tapped the bottom of lower inflection box and price stalled. No positions change.
The most important thing I posted on Tuesday was the following entropy pattern as I was very anxious of an upcoming selloff. The last time I saw this was in December ‘24 where a violent selloff ensued shortly after. Look at machinaquanta.com and prove this to yourself. This is one of the BIGGEST reasons I doubled my April hedge position and noted you readers of that.
Below is SPX reaching the first box of interest on Tuesday and stalling.
Weds. Mar. 26 commentary:
“Model updated, shows start of pullback signal”.
“We are at the resistance I mentioned, model is starting to point down, GEX has elevated again to a reasonable level to short (although I don't see the divergence I'm looking for). BUT this euphoric buying I feel is missing which is the part that is getting to me. In every other aspect it feels like a layup short. Can it really be that easy here?”
“[after selloff] we are now back to where I began adding to my April hedges. We have gone nowhere in 4 days lol”.
Notice above I tried to identify (as many) confluence of factors as I could and NOT just the model. There were several factors telling us a short is good edge but I wanted one more factor which I did not get on Weds. The short seemed so obvious that I actually could not believe it so, no action on my part. TLDR: we had edge here.
Result:
SPX sold 60 points. No trades (was already in full hedge on April puts from prior week).
Here is the sell ‘signal’ from the entropic model in the morning chat.
Below is the response in SPX. It reached an area where I thought price would take a break (orange circle).
Thrs. Mar. 27 commentary:
“Entropy looks stable this morning despite the gap down and hence you see BTD this morning”
“I'm not picking a direction here as I don't see an edge either way but I'm long until I am warned otherwise. Or will reload more longs with cash on sidelines.”
I’m noting this not to be wishy/washy. There is something for all of us to learn/remember from this. When you are in the middle of a wide range you lose your edge. I did not know which direction we would break. That decision was much easier on Tues./Weds. when we reached our first inflection point. So, naturally you would not enter a new trade in the middle of the range.
Result:
SPX ripped up in morning and ended flat. No trades.
One important note above the entropy output above that I overlooked on Thursday but has significance. While entropy marked up, it did NOT recover to a new high and this is signifcant. Recall that entropy is calculating all micro states in the underlying market structure. The structure itself did not ‘recover enough’ so although traders bought the dip, the market still ended flat - a weak underlying structure. The result is that it tends to increase the probability of a selloff.
Fri. Mar. 27 commentary:
[Friday was a misfortune as there was a data feed issue for about 20-30 mins in the morning. I hope it doesn’t happen again. Sorry folks.]
“Not knife catching today. I am still net long and the April (sleep better at night hedges) are kicking in.”
“Today is not the day I want to add more longs as it seems the market is not impressed with the political environment.”
“I've mentioned this before I feel we need a gap down and red -> green day to get some actual price support. And that means STILL a lower price from here. It's hard to hedge further from here though with SPX for example. Cash is a wonderful hedge.”
Result:
SPX gapped down and sold off ~110 handles. No trades. April hedges +65%.
Model output in the morning below with the second sell trigger.
Below is the resulting SPX price response. Note we are in no man’s land at the moment.
Summary:
Thankfully, our strategy and chatroom (mostly me talking out loud to myself) prevented me from buying the pump job early this week. However, I was too cautious and didn’t take my additional short position when I pre-planned for it, despite the stars lining up. Luckily, I had my doubled up April puts which closed the week +65%. I’d say another week I got lucky.
Disclaimer
This Substack serves as a personal journal for my own reference and is not intended as financial or investment advice. The content is purely informational and reflects my personal observations, not recommendations.
I am not a registered financial advisor, and nothing here should be considered professional guidance. Investing, especially in securities and options, involves substantial risk, and past performance does not guarantee future results.
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