AroniSmartIntelligence™ in Action: Time Series Support Vector Machine and Neural Network Analysis of Stock Market Indices in Q4 2020 - Q4 2021

After a fueled momentum since Q4 2020, the stock market has experienced seesaw dynamics since late Q3 2021. The latest Q3 2021 stock market pefomance figures reminded of the increasing market volatility and other dynamics in late Q1 and early Q2, 2021. Major questions coming from AroniSmartIntelligence™ users have recently focused on how to use AroniSmartIntelligence capabilities to analyse the connection among the key Stock market indices, especially NASDAQ vs  Dow Jones(DJI), S&P 500, and Russell 2000.   AroniSmart™ team, leveraging the Machine Learning Time Series capabilities, including Support Vector Machine,  and Neural Network Analysis of AroniSmartIntelligence™ ,  has analyzed the trends of  NASDAQ vs  the  other stock indices (DJI, S&P 500, Russell 2000)  between Q4 2020 and  Q4 2021 and came up with insights and  projections on the dynamics.   The insights are presented below (for disclaimer and terms, check AroniSoft website. For related analyses of Stock Markets using Time Series, Dominance Analysis, and Neural Network capabilities see here AroniSmartIntelligence™ in Action: Apple (AAPL) Stock Performance and Momentum Analysis with Support Vector Machine and Dominance Analysis in Q3 2021)

 The analysis produced the different measures of forecasting accuracy, including  directional accuracy of Stock market indices. Directional accuracy is an important statistic when ones tries to look at the prediction of a given stock market indice  vs others, for example, as in this case, the  NASDAQ  Adjusted Closing Price as a function of Open,  Low, High, and Closing Prices and volume  of other market indices.  

A little bit of the usual investment research before coming back to AroniSmart™'s findings.

Indices Momentum

In general all indices have experienced an upward momentum since Q4 2020: Dow Jones (.DJI) has grown by 19.62% to 34,496.06; S&P 500  (.INX) by 23.40% to 4,361.19;  Nasdaq Composite (.IXIC) by 21.98% to 14,486.20; Russell 2000 Index (RUT) by 34.66% to 2,220.64.   However the dynamics in the last 6 months (mid Q2- early Q4) are mixed: Dow Jones (.DJI) has increased  by 2.22%; S&P 500  (.INX) increased by 5.65%;  Nasdaq Composite (.IXIC) increased by 4.59%; Russell 2000 Index (RUT) decreased by 0.59%.  

In the last month, all indices have been decreasing:   Dow Jones (.DJI) has  decreased  by 1.07%; S&P 500  (.INX) decreased by 2.41%;  Nasdaq Composite (.IXIC) decreased by 4.10%; Russell 2000 Index (RUT) decreased by 0.90%.

Hence, although the dynamics  of all the stock indices appear aligned, there appears to be some significant  differences in the details. All the indices behaved similarly, when looking at  the factors that were affecting the overal market in early 2021, such as COVID-19 pandemic,  the last US general elections, the uncertainty on the job market, the growing inflation, and the economic policies. Then each indice  factoring the dyanamics unique to the sectors dominating its specific composition.

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Similar Trends with  Differential Nuances.

AroniSmart™ team  analyzed  stock indices performance dynamics, leveraging the  Econometrics and Time Series Support Vector Machine  and  Neural Network Multilayer Perceptron  capabilities  of  AroniSmartIntelligence™ and uncovered interesting insights, as shown below. The team analyzed the performance of NASDAQ Adjusted Close vs  Open prices of the other indices (DJI, S&P 500, Russell 2000) , and each indice's Adjusted Close vs other indices prices (open, low, high, adjusted close) and volume,  from  October 12, 2020 to October 11,  2021.

From the analysis, it was found that  these indices basically follow similar trends. Also, they are all similarly impacted by the market conditions. However, the analysis found important nuances. 

The key findings highlight:  the indices studied had an upward momentum over the period. However, like the general stock market, they faced a slowdown and high volatility in late Q1-Q2 2021 before starting a bounce back, then going on a seesaw movement. Trendwise, since  June 2021, the stocks  have been on fueled momentum  reaching high or record  price levels. The upward momentum accelerated in Januay,  June, July and August 2021. Then in September and October, 2021, the dynamics pointed to a slow down, downward trends, seesaw movements, and probably a potential correction.

Figure 1: Key Indice Price Trends  in Q2-Q3 2021 -- Training Data model.

Figure 2: Key Stocks Indice Trends  in Q2-Q3 2021 -- Test Data model.

Over 2021 all the stocks indices built on an earlier momentum, almost following similar trends.  

By July  of 2021  most indices were above the  average Q1 2021 levels. In early Q2 2021,  all indices momentums were significantly impacted by the market conditions. In late May 2021, they bounced back and maintained momentum until late September 2021 (see charts below). Since then, the indices have been experiencing seesaw dynamics.  As expected, the indices do not exactly follow the same trends and projections, neither in training nor in test data (see DJI and NASDAQ examples below).

Figure 3: Dow Jones (DJI)  Step Estimate  July 2021 - October 2021

Figure 4: NASDAQ  Index Trends and AroniSmart Projections Analysis Between October 2020 and  June 2021

Figure 5: NASDAQ Stock Market Index Trends and AroniSmart Projections Analysis Between July 2021 and October 2021

AroniSmartIntelligence™ modelling shows the stock indicesthat  appear to mirror each other: a high opening for  the stock market indices that tends to lead a decline or slow down in  NASDAQ's adjusted closing price and a high opening for  the  stock market indices that tends to lead an increase or growth in  NASDAQ's adjusted closing price.  Late Q4 2020 - Early Q1 2020 and late Q2- early Q3  dynamics appear to positively impact NASDAQ Index, whereas the end of Q3-early Q4 2021 appears to have been challenging.

AroniSmartIntelligence™ analysis, using Time Series Support Vector Machine modelling and Neural Network Multilayer Perceptron ,  below shows the weights of the different indices and the forecast statistics.  From the statistics, directionay accuacy is in general high, pointing to an overall simila dynamics across all maket indices.

 Figure 6 - a:  NASDAQ Stock Index Dynamics and Statistics - AroniSmart Support Vector Machine Analysis Results  for the Period  Between October 2020 and  October 2021: Statistics

 Figure 6 - b:  Stock Index Dynamics and Statistics - AroniSmart Support Vector Machine Analysis Results  for the Period  Between October 2020 and  October 2021: Weights - DJI example.

AroniSmartLytics™ Neural Network Analysis  confirms Time Series Support Vector Machine results:  NASDAQ momentum negatively impacted in late Q1 2021 - early Q2 2021 and late Q3 2021 and  generally aligned with the momentum of most of other stock market indices.

AroniSmart™ team  analyzed NASDAQ's performance dynamics using Neural Network Analysis  capabilities  of  AroniSmartIntelligence™ and uncovered  insights confirming the performance dynamics of NASDAQ vs   other market indices  from  October 2020 to  October 2021. See below:

 Figure 6-a:  NASDAQ Stock Index Dynamics - AroniSmart Neural Network Analysis Results  for the Period  Between October 2020 and  October 2021

 Figure 6-b:  NASDAQ Stock Index Dynamics - AroniSmart Neural Network Analysis Results - Model setup and network  for the Period  Between October 2020 and  October 2021

 Figure 6-c:  NASDAQ Stock Index Dynamics - AroniSmart Neural Network Analysis Results - Weights  for the Period  Between October 2020 and  October 2021

More detailed analyses can be conducted using AroniSmartIntelligence™ Big Data, Machine Learning, Time Series, Neural Network and Sentiment Analysis capabilities.

For  more on AroniSmartIntelligence and AroniSmartInvest capabilities, visit AroniSoft web site by clicking here. AroniSmartInvest™ and AroniSmartIntelligence ™ are available on Apple's App Store.

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