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BrainMaker Neural Network Software

Predict the S&P 500 Index with BrainMaker Neural Network Software

LBS Capital Management, a highly rated investment firm (Clearwater, FL) manages more than 200 million dollars in investments. LBS relies almost exclusively on computer techniques to guide its decisions in predicting the S&P 500 Index. The firm is a forerunner in using neural network software to recognize patterns and predict indexes and trends for financial forecasting.

The latest approach in forcasting used by LBS integrates an expert system with a neural network to make the most efficient use of the talents of each. The expert system provides rules which govern the application of the neural network to the prediction. For example, if the expert system says the market is trending and the neural network forecasts the S&P will go up, then a buy signal is generated.

In predicting the S&P 500 index the neural network is trained with only recent market data (less than five years' worth) because it was found that the actual behavior of the market 25 years ago was not the same as it is today. Commonly available indicators are used such as the ADX, MACD, stochastics, DOW, volume, etc. The BrainMaker neural network "window" was found to be most effective at five market days for predicting the S&P 500 index. It was speculated that every weekday may have a certain "tone" to it, so that all Mondays tend to behave similarly. By presenting five day intervals as historical input data while outputting forcasts for five days in advance, the neural network deals only with the same weekday for each prediction.

The neural network trained by LBS predicts the S&P 500 with an average accuracy of 95%. This statistic was obtained by testing the network on hundreds of days it had never seen before. The network is retrained every night with the most current information to keep its behavior in agreement with the current behavior of the market.

INPUTS
ADX 15 days ago
ADX 10 days ago
ADX 5 days ago
ADX today
MACD 15 days ago
MACD 10 days ago
MACD 5 days ago
MACD today
volume 15 days ago
volume 10 days ago
volume 5 days ago
volume today
etc.,  for each indicator

OUTPUT
S&P500 5 days in future