[Frank]

'Regime Change' is quant terminology for when a market takes on a different environment. Typical 'regimes' are inflationary vs recessionary regimes, mean-reverting vs trending regimes etc....

Basically, the idea is that the market environment changes dramatically from time to time and blows up all the strategies that have been optimized to the 'last regime'.

I present data to discuss 'MP based Regime Change: TPO Count as Measure of Volatility in S&P Futures'. That is, wider 30-min bars represent a different regime than a narrow 30-min bar market does.

Here is some recent data:



note how TPO count (Volatility) has been dropping for 11 straight months (scan column on far left). Despite VIX remaining elevated, the S&P futures went into very narrow action over past few months. The last few days seemed to be start of a new regime. I propose that we get an upcoming 'regime' that shows some better range than past few months. But let's track it here and see how it goes.

[dam5h]

i would be interested to get this data going further back, where can I access it? great post and i agree with your prediction.

[Frank]

hi dam,

I have data back to 2002 -- its 25,000 rows so I will just present the Monthly Average In table form.

As you can see, there is a very wide range of values and it is somewhat similar to a VIX chart -- I will overlay them but here is the data table to chew on. I added 1 calculation this time which relates TPO's to the closing value --- while 1 tick is $12.50 no matter what the level of S&Ps, thought I should put it on there anyway.

One possible reason for an increase in volatility is not so much the level of TPO's -- but the general seasonal uptick --- the last 7 years have been flat or up from September to October --- and the fact that its basically gone down every month this year.

[dam5h]

how has this data looked of late. to my chagrin things seem to have slowed down again.

[Frank]

its its been regime change alright -- but for the worse...

TPO counts are down again this month, signalling even narrower conditions.

[Frank]

Let's put some data behind this -- first just update the data table for new month-to-date data. As can see, TPO counts are down again this month.




A second look at traditional market profile would be to look at range and its relationship to the first hours range. What is odd about this market is that it has in general been doing first hour range consistent with 2007's type of average -- ~7.75 - 8.00 pts ---- but then there is not much range past the first hour. so while overall range for the day is similar to 2003-2006, ~11-13 pts -- it is skewed more towards the beginning of the day. This isn't meant as something I expect to continue or a forecast in any way -- just pointing out the nature of the profile relative to history.

[zdo]

“façade exhausted bulls and broke, beat up bears” was a comment from my blog. But something else is going on - narrowed ‘volatility’ coupled with very atypical slope (ie HUGE movement in short time period and virtually nonexistent scotoperiods). Hm ??

[Frank]

one way to get better grip on this is to look at historical statistics comparing THAT DAYS intraday volatility. The concept being that if TPO count is low in morning, the afternoon will rarely show dramatically different TPO counts -- thus, can adjust to that days volatility to some extent --- with statistical caveats of 'outliers' always in back of mind.

So I did this a while ago and updated it -- basically it compares the first 7 pit session bar TPO counts to the final 7. And basically, the FINAL tpo count has fallen into a range that is 1.7 -2.1x the first 7 30-min bar TPO count. Thus, a general idea would be that to temper profit objectives on any afternoon trades in low TPO count days. And perhaps look for incrementally more in high TPO count environments.