| Horizon | Sensitivity | PPV (precision) | False Positive Rate |
|---|---|---|---|
| 10 days | 16.7% | 58.3% | 1.2% |
| 20 days | 16.7% | 58.3% | 1.2% |
| Horizon | M8 hit rate | M1 hit rate | M8 advantage |
|---|---|---|---|
| h=1 | 50.0% | 52.7% | -2.7 |
| h=5 | 53.0% | 55.2% | -2.2 |
| β h=10 | 52.8% | 52.9% | -0.1 |
| h=15 | 56.2% | 56.9% | -0.7 |
| β h=20 | 55.9% | 55.9% | +0.0 |
GEO_REGIME inactive (geo_shock = 0.380). Regime: SURPRISE / DISRUPTION β consistent with high ECT z (+2.63), elevated narrative disruption. Iran: no agreement, ceasefire broken, U.S. resumed limited bombing. Hormuz situation unresolved. Oil volatile (β18% MTD). FEDERAL_RESERVE elevated β Warsh swearing-in (May 22). UkraineβRussia drone escalation ongoing.
| Model | Hit Rate | Sharpe |
|---|---|---|
| M7 Inv-MSE Ensemble ensemble | 92.4% | 22.6 |
| M6 β 20d Time Trend prior champ | 32.0% | β7.2 |
| M1 β JA OLS Narrative | 93.4% | 23.3 |
| M3 β Regime-Ensemble | 92.0% | 22.3 |
| M2 β VECM Error-Correction | 91.3% | 22.1 |
| M5 β Narrative Polarity | 87.4% | 19.7 |
| M4 β Momentum-5d | 60.9% | 4.2 |
The S&P 500 closed at 7,588 on May 29, 2026 (intraday reading at 11:14 AM CT, estimated close), extending the post-April-trough rally. The PC-1 narrative composite stands at 4.57 β elevated disruption signal consistent with the SURPRISE / DISRUPTION regime designation. The M7 consensus signal is LONG at 100%, with a weight-of-evidence increment of +4.00 dB. The ECT z-score of +2.63 confirms the market is significantly above its long-run narrative-implied equilibrium. The analyst's framing this week: momentum is intact, but no new catalysts are strong enough to break the pattern in either direction. The market is tethered to trend.
M7 forecasts a DeviationfromTARGET path that declines from the current +1,242-point gap toward +634 points over the next 20 trading days. The implied level forecast β projected Target + M7 deviation, anchored to today's close β places the base path at 7,518 by June 26 (-0.9%). This is a modest downward drift, not a crash signal. The analyst's interpretation aligns: the co-integrating relationship between sentiment narratives and the deviation from target is pulling the market back toward its long-run trend. This is the tethering dynamic the analyst identified β it is what the ECT z-score at +2.63 describes, and what the M7 cone is forecasting as gradual resolution. The question is pace, not direction.
WORDSTAT-detected narrative activity this week: FEDERAL_RESERVE is elevated following the Kevin Warsh swearing-in (May 22) β this is the model-detected proxy for the Fed chair transition and likely contributing to the SURPRISE regime flag. OIL PRODUCTION & CUT and CRUDE_OIL remain active as oil prices have dropped 18% month-to-date but remain volatile. IRAN_STRIKE narrative is declining (GEO_REGIME = 0, geo_shock = 0.38) but the analyst flags the ceasefire is broken and limited bombing has resumed β watch for a GEO_REGIME re-activation if IRAN_STRIKE spikes above 1.0 SD again. RECESSION FEAR and INFLATION are model-detected as present but moderating.
| Signal | Current | Trend | Status |
|---|---|---|---|
| PC-1 Narrative Composite | 4.569 | β | SURPRISE regime active |
| FEAR | 280 WP10K | β | Moderate / Stable |
| GEO SHOCK (GEOSHOCK_F) | 0.380 | β | Easing β GEO_REGIME = 0 βΉ model |
| ECT z-score | +2.629 | β | β Strong reversion signal |
| FEDERAL_RESERVE βΉ elevated | Elevated | β | Warsh sworn in May 22 β watch for PC-1 shift |
| TARIFF | β | β | Present / Background |
| RECESSION FEAR βΉ model | Moderating | β | Past news bump β structural persistence watch |
| INFLATION βΉ model | Moderating | β | Reporting subsided; structural impact likely permanent |
| CRUDE_OIL / OIL PRODUCTION & CUT | 87.59 USD | β β18% MTD | Volatile β Iran recalcitrance, no Hormuz deal |
| M7 DeviationfromTARGET (h=1) | +1,239 pts | β | Forecast: declining toward +1,116 by h=20 |
| Scenario | h=20 Target | vs Current | Catalyst (Analyst / Model) |
|---|---|---|---|
| π’ +2Ο (Bull tail) | 7,977 | +5.1% | Oil prices continue to fall; Senate primary wins translate to fiscal optimism; Warsh cuts rates faster than expected |
| π’ +1Ο (Upside) | 7,752 | +2.2% | Named upside: oil down + Trump Senate momentum carry forward |
| β¬ Base (M7) | 7,524 | -0.8% | Gradual co-integration tethering β ECT reversion over 20 days |
| π΄ β1Ο (Downside) | 7,284 | -4.0% | Iran recalcitrance intensifies; oil spikes; ceasefire fully collapses |
| π΄ β2Ο (Bear tail) | 7,060 | -7.0% | Hormuz re-closure + inflation re-acceleration + surprise negative political shock |
M7 20-day base: -0.8% (mild pullback) Β· NAF avg h=20: +3.0% (historical analogs all showed gains) Β· Analogs are from a lower SP baseline (~$5,900β$6,400) β the current market is elevated at $7,588. Review the analog tail risk narrative: is the elevated deviation from target (ECT z=+2.63) what differentiates today from these analogs?
Hybrid Cognition layer: analyst judgment applied before and after model run. Items below are analyst-supplied unless labeled [model detected].
No agreement in sight between the U.S. and Iran. Iran is demanding a $12 billion payment and showing continued recalcitrance. The U.S. accused Iran of breaking the ceasefire and has resumed limited bombing. Oil prices have fallen sharply this month (β18% MTD, now at $87.59) but this is characterized as a "roller coaster that is difficult to predict using force field analysis of any kind." The UkraineβRussia war could escalate as each side is using drones to attack key target areas. Not much has changed this week to push the market beyond its normal momentum.
Regime: Continued Growth. The key question is when the co-integration tethering between sentiment narratives and the deviation from target will draw the market back down. The analyst suspects this is what explains this week's forecast showing a downward correction over 20 days. The M7 LONG consensus at 100% reflects momentum, but the ECT z-score at +2.63 is a strong reversion signal.
- Cuba β Watch. Analyst flagged explicitly.
- FEDERAL_RESERVE β Watch for unexpected policy statements. Warsh swearing-in (May 22) likely to generate sustained headline volume. Warsh is rate-cut-friendly; market has partially priced this in. analyst elevated
- Tulsi Gabbard departure β Intelligence agency anti-Trump narrative watch. analyst flag
- Inflation β Past news bump but structurally probably permanent impact. Reporting has subsided. model detected
- UkraineβRussia drone escalation β Both sides targeting key infrastructure. Escalation risk. analyst flag
- Surprise cycle periodicity β Analyst notes: watch for periodicity of surprise cycles that could emerge this week. downside focus
- PC-1 sign flip note β This week's Minitab PCA reversed quadrants; values multiplied by β1 before Stata run. KS stationarity WARN flag is a statistical artifact of this correction, not a genuine regime shift. model detected
- CAUSALITY_NO_SUPPORT β All three causality methods (TY, Sims, Hsiao, Chen) confirm cointegration, not short-run forcing. Expected. βΉ model
- PERFORMANCE_IMPROVEMENT_TEMPORAL β M7 hit rate in the most recent backtest third is 5+ ppts above the earliest third. Model improving over time. βΉ model
- GEO regime (100 episodes) β M1 and M7 both hit 100% during GEO_REGIME = 1 periods. GEOSHOCK feature strongly validated. βΉ model