Paratrade Systems

Gauging Fear to Fuel Superior Returns

We measure the key variables that have historically sparked good returns in stocks and bonds. Once we know where they stand we can skew risk/reward in our favor.

There are only a few things we need to know to determine when there is good money to be made in stocks and bonds:

  • In stocks we measure how scared people are and whether interest rates are rising or falling. There may be other factors involved in a long term trend but these two factors are the keys to significant positive returns.
  • For bonds, we must measure inflation and economic growth. If the former is benign and/or the latter is weak, we can expect good returns.

It’s that simple. Paratrade’s fuel gauges boil these factors down to two simple indices for each market – one is daily and the other is weekly. There are also two such gauges for the “risk parity” position where you are long both stocks and bonds.

We can study the historical performance of the market when the fuel gauges are at varying levels. The table at my site shows filtered S&P and bond returns for different ranges of the indices. There is a clear skew.  

By subscribing to Paratrade’s daily commentary, you will receive an update about where these indices stand. Can you afford not to know?


Title Date
We are sending most of the equity fuel we earned from the pullback. 2018/02/18
The equity and Risk Parity gauges are nearly full but maybe it's easier to express the trade differently. 2018/02/11
Yes, I finally have a buy signal on ES and Risk parity ... 2018/02/07
The Vix spike has provided us with a healthy amount of (transient) fuel. 2018/02/06
We'll need some great earnings news to offset higher interest rates ... 2018/02/01
The equity gauge remains stuck in no man's land. 2018/01/28
Saying goodbye to Risk Parity 2018/01/23
Equities rally but Vix barely declines - a good sign. Buying Risk parity is a better way to get long equities. 2018/01/22
The RP gauge is still OK ... did you partake? 2018/01/17
Bonds are completely out of gas - thanks to oil's relentless rise. 2018/01/10
The bond gauge recovers, but bonds still need more fuel. 2018/01/07
The daily gauges hit very bearish levels at the same time. 2018/01/04
Extend your New Year's holiday! 2018/01/01
The equity fuel tank just lost a lot of fuel. 2017/12/28
The rally was costly but don't get bearish, yet. 2017/12/16
The bond gauge creeps higher in spite of the price rise. 2017/12/13
The equity gauge weakens but we're still OK .. Go RP!! 2017/12/11
The gauges still love Risk Parity 2017/12/06
I got a chance to add to my Risk Parity position. 2017/12/05
The equity gauge remains impervious to rallies. 2017/11/28
The weeklies shift higher into neutral territory. 2017/11/26
Tuesday's decline helped the equity gauge. 2017/11/24
Today's rally didn't hurt the equity gauge. 2017/11/22
The equity gauge is sticky at lofty levels. 2017/11/19
The Risk Parity gauge crosses a threshold. 2017/11/15
The equity gauge hits 100! 2017/11/12
The equity tank still has lots of fuel. 2017/11/05
Staying with equities 2017/10/30
We had a trauma event! (You need to know hat that means) 2017/10/25
Still nervously holding on to my equity position. 2017/10/24
The weekly bond gauge jumps and the daily crashes out. 2017/10/16
Bonds are a pleasant surprise. 2017/10/15
Still hanging on to my bonds 2017/10/12
The bond fuel tank sprung a leak 2017/10/11
Staying with Risk Parity 2017/10/10
The daily equity gauge moves (up) to neutral. 2017/10/09
I'm staying with my long Risk Parity position. 2017/10/05
Bonds and RP stay healthy 2017/10/04
The bond market is completely out of gas. 2017/09/28
The (daily) fuel tanks don't have much fuel. 2017/09/10
The equity gauge will be sticky. 2017/08/13
A new trauma even fills up the equity fuel tank. 2017/08/09
Today's rally was pleasant but somewhat expensive 2017/08/07
Did we get enough additional fuel to add to our long equity position? 2017/07/30
Equities are running out of gas. They need a good surprise from Washington or ... 2017/07/25
Sticking with (long) RP 2017/07/17
That was an expensive (but pleasant) rally. 2017/07/09
That tiny rally ate up a lot of (equity market) fuel. 2017/07/05
Happy Dailies and Sickly Weeklies 2017/07/02
Nice rally but it cost us a lot of fuel. 2017/06/28
We finally got some bad news/fear. 2017/06/27
The equity gauge inches closer to a buy level. 2017/06/22
The equity tank gets a modest refill. 2017/06/15
Yes, I still prefer bonds 2017/06/13
The weekly equity gauge is not happy with bonds. 2017/06/12
Nasdaq volatility helped the equity gauge a little but we need more. 2017/06/11
The daily bond gauge rose back up to its ceiling. 2017/06/08
The daily bond gauge loves the oil mess. 2017/06/07
US $ weakness is hurting the daily bond gauge. 2017/06/06
The daily S&P gauge is gasping for a pullback. 2017/06/05
The weekly equity gauge hit the ceiling! 2017/06/04
The weekly gauges get healthy 2017/05/30
In the short term bonds look safer than stocks. 2017/05/29
Oil swings the bond gauge 2017/05/25
NQ's still doing their job 2017/05/24
Not much S&P gas left but my stops are still untouched 2017/05/23
Tightening my stops on NQ's 2017/05/22
The bond gauges have crashed! 2017/05/21
Say goodbye to bonds 2017/05/18
Today's price decline didn't bolster the daily (S&P) gauge. 2017/05/17
Short term (equity) traders should be short or flat 2017/05/16
I hope you have been following me ... 2017/05/14
S&P will struggle without a bond rally 2017/05/10
Vol adjusted fear is still too low for a rally in the S&P 2017/05/09
Equities are tired so protect them with bonds. 2017/05/08
Rallies don't hurt the S&P gauge 2017/05/07
Bonds have a lot of fuel going into tomorrow's news... 2017/05/04
Apple volatility changed nothing. 2017/05/03
Bonds are on solid ground. 2017/05/02
The market rally pushed the S&P gauge UP a little. 2017/05/01
Gasping for fear in the S&P market. 2017/04/30
The S&P leaky tank is becoming a problem. 2017/04/28
The S&P fuel tank has a hole in it. 2017/04/27
Shifting towards bonds 2017/04/24
Start your Risk Parity engines. 2017/04/23
Almost time to switch ES position into an RP position 2017/04/20
Some hope for bonds... 2017/04/19
The equity spring compresses some more. 2017/04/18
The S&P gauge still has plenty of fuel. 2017/04/17
It's getting hot in here. 2017/04/16
We are all in, with a stop. 2017/04/12
Weaker Weeklies 2017/04/10
Today's rally didn't hurt much 2017/04/06
Shifting out of bonds 2017/04/04
Sticking with Risk Parity 2017/04/03
Stay with RP but overweight equities. 2017/04/01
RP looks to be on solid ground. 2017/03/29
Holding on to my longs, with wide stops 2017/03/28
This is what we wait for. 2017/03/27
Nervously long everything 2017/03/23


  • Chris Evans

    Analyst Years of Experience: 30

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