Skip to main content
Track Intermarket analysis
1 / 33
Search the archiveLibrary
Library

1990issue C021-5

Policy-auction spread as a weekly equity regime filter

A weekly equity holding can be treated as a stay-exposed or stay-out decision. The archive workflow smooths the policy-auction-spread, converts the sign of the smoothed-spread into a positive-regime or negative-regime state, and checks those states against historical equity paths and open-signal-drawdown.

  • The weekly policy-auction-spread is the administered discount rate minus the three-month bill auction yield.
  • That difference is refreshed as a smoothed-spread with a 15-week exponential average that applies 0.875 to the previous average and 0.125 to the newest difference.
  • The long-side rule starts when the smoothed-spread turns positive and stays in force until that average turns negative.
  • Editorial reading: evaluate the regime-overlay by how cleanly the two states separate historical equity paths and open-signal-drawdown, not as a next-week price forecast.
Entries in this reading3 entries
Current trackIntermarket analysis136 readingsRule-based entry174 readingsMoving average449 readings

A weekly holding as a regime decision

The archive workflow places one equity holding inside a rate-and-policy context. It does not ask the next sampling interval to be predicted from the latest price.

Editorial reading: use the sign of the smoothed-spread as a stay-exposed versus stay-out choice. Judge the procedure by how cleanly those states separate historical equity paths and open-signal-drawdown.

From policy-auction-spread to smoothed-spread

The weekly input is the administered discount rate minus the three-month bill auction yield. That difference is the policy-auction-spread.

A market bill yield below the administered policy rate is treated as the bullish intermarket state. The reverse is treated as the bearish state.

That difference is then smoothed with a 15-week exponential average that applies 0.875 to the previous average and 0.125 to the newest difference. The result is the smoothed-spread.

A worked weekly update used a 7 percent discount rate, a 7.9 percent bill yield, and a prior average of -0.70 to obtain a new average of -0.73. That new average remains below zero, so the update stays in negative-regime.

The long-side rule

The long-side rule starts when the 15-week average turns positive and stays in force until that average turns negative.

Positive-regime is the state in which the smoothed-spread is above zero and treated as the stay-exposed equity window. Negative-regime is the state in which the smoothed-spread is below zero and treated as the abstention or defensive window.

How the historical check was recorded

The historical check used weekly updates from 1953 and recorded the S&P 500 path plus the largest interim close-to-close decline while each long signal was open. That largest interim decline is the open-signal-drawdown.

The two-state wealth comparison assumed an S&P 500-matching holding and left out dividends, commissions, and taxes.

The same crossing rule was described as less dependable for exits than for entries, including a later negative-regime interval during which the equity benchmark later advanced.

Editorial reading: keep more weight on entries and on open-signal-drawdown than on treating every move into negative-regime as a finished exit call.

Buy-signal versus sell-signal S&P 500 wealth from the TB/DR weekly filter

A $10,000 stake left in the S&P 500 only while the 15-week TB/DR average stayed positive grew to $375,593; the same stake held only on sell signals shrank to $3,940. The table records every weekly-rule flip from September 1953 through the 18 August 1989 cutoff, so the two paths show how cleanly the sign of the smoothed policy-auction spread separated historical equity outcomes.
A $10,000 stake left in the S&P 500 only while the 15-week TB/DR average stayed positive grew to $375,593; the same stake held only on sell signals shrank to $3,940. The table records every weekly-rule flip from September 1953 through the 18 August 1989 cutoff, so the two paths show how cleanly the sign of the smoothed policy-auction spread separated historical equity outcomes.S&P 500 · weekly TB/DR 15-week EMA regime · 1953-09-25T00:00:00.000Z to 1989-08-18T00:00:00.000Z

Source table ends the last sell path as of 18 August 1989 (asterisk). Dividends, commissions and taxes are omitted, matching the article. Dates use month/day/year as printed.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
1 of 33 in the Intermarket analysis track
19921-5 pp.Next on Intermarket analysisElectric utilities as bond-regime contextUtility stocks have historically tended to turn before the broader equity market at both peaks and troughs, a pattern attributed to their close ties to the bond market.
All readings on this track · 33 readings
  1. 1990Policy-auction spread as a weekly equity regime filter
  2. 1992Electric utilities as bond-regime context
  3. 1992Reading the dollar as a rates-regime check
  4. 1992Evaluating weekly intermarket context for equity regimes
  5. 1993Specifying the stock-bond yield gap as a hold-or-abstain regime
  6. 1996Constructing dual-gate bond-fund entries from gold-silver jumps
  7. 1996Name the regime before the sector breakout
  8. 2002Falling prices flip stock-bond confirmation
  9. 2003Four sleeves on one regime board: gold miners, REITs, bills, and equities
  10. 2003Four currency regimes for the yen, loonie, pound and Australian dollar
  11. 2003Read gold through the dollar regime, the hedge spread, and a stop
  12. 2003When deflation flips the stock-bond map
  13. 2003Commodity subgroup regime boards and dual averages
  14. 2003Reading a liquidity regime when gold, bonds, and stocks rise together
  15. 2003A shared weekly checklist for four country funds
  16. 2004Size-and-style sleeves as a weekly regime map
  17. 2004Country closed-end funds shared one average checklist and four regimes
  18. 2004A 2004 four-pair snapshot of a dollar-bloc FX regime
  19. 2005Country closed-end funds as a weekly regime comparison
  20. 2005Weekly regime maps for production-weighted commodity subgroups
  21. 2005Four technology sleeves on one weekly regime map
  22. 2006The Australian dollar as a commodity regime and timing filter
  23. 2008Dual-listing moving averages as a crowd-regime test
  24. 2008Cross-market regime context for a single trade
  25. 2010Dollar index, cross rates, and commodity context for forex targets
  26. 2010Gold and silver forex session candles as metals-regime context
  27. 2012Yield curve regime and equity timing
  28. 2013Yield curve shapes as stock market regime context
  29. 2013Yield spreads as country-specific equity regime context
  30. 2016Credit spreads as an equity cash regime filter
  31. 2016The summer lull is a context error
  32. 2019Financial sector spreads as regime tells around a global stablecoin
  33. 2019The negative-yield regime as an equity intermarket filter
By fieldIntermarket and spreads148 readingsBy year199092 readings
All 136 readings tagged Intermarket analysis
Also on Intermarket analysis5 readings
2006The Australian dollar as a commodity regime and timing filter1994Constructing gold-mining rate-of-change tripwires for Treasury bonds1996Constructing dual-gate bond-fund entries from gold-silver jumps1993Constructing forecast inputs with moving averages, Fourier transforms and intermarket spreads1993Specifying the stock-bond yield gap as a hold-or-abstain regime