The Origin Story
Every morning, Ray pulls market intel, runs Kronos forecasts, and makes trading decisions on a paper portfolio. This post explains exactly how that works — the signals, the models, the math, and the lessons learned from backtesting our own weights against a year of data.
There are two systems running in parallel. They have different philosophies, different thresholds, and different time horizons. Here’s how each one works.
System 1: The AI-Trader Swing Engine
Philosophy: Wait for high-conviction setups. Hold 2–5 days. Don’t trade noise.
This is the original system — a 10-signal combined score that must clear 0.65 before a BUY fires. In practice, it fires roughly once a week at most. During the Iran war oil shock, it held cash for nearly three weeks straight.
The 10 Signals
| Signal | Weight | What It Measures |
|---|---|---|
| StockScout VST | 22% | Pi’s full S&P 500 scanner — momentum composite |
| VIX Trend | 25% | 10-day VIX direction — market fear gauge |
| Oil Filter | 20% | WTI price level — suppresses buys above $100 |
| Earnings Proximity | 10% | Days until next earnings — avoids binary event risk |
| Sector Momentum | 8% | SPY 20-day return — broad market direction |
| Geo Stress | 8% | GDELT incident count — geopolitical risk proxy |
| Yield Direction | 7% | 10Y treasury 10-day change — macro headwind/tailwind |
| quant_score | 15% | Data-driven composite (see below) |
| Defense Premium | 3% | RTX/LMT/NOC relative strength |
| Mean Reversion | 2% | RSI-based oversold signal |
Hard Gates
Before scoring even runs, three conditions can block all buys:
- VIX above 25 → no buys
- WTI above $100 → no buys (non-energy names)
- GDELT incidents above 1,000 → no buys
This is why the system held cash through most of April and early May — WTI was $94–109 and GDELT was running 800–1,100 consistently.
The Backtest That Changed Everything
In early May we ran a proper regression backtest using methodology from the MIT Sloan Business Club Quant Bible — OLS regression + LassoCV + Spearman Information Coefficient across 8 stocks, 1 year of daily data, 5-day forward risk-adjusted returns.
The results were humbling:
| Signal | Current Weight | t-Statistic | Lasso Weight |
|---|---|---|---|
| 10Y Yield Direction | 7% | 16.4 ⭐ | 93.7% |
| Sector Momentum | 8% | 2.89 | 6.3% |
| StockScout VST proxy | 22% | 0.14 | 0% |
| VIX Trend | 25% | 0.12 | 0% |
| Oil Filter | 20% | −2.85 | 0% |
| Geo Stress | 8% | −5.90 | 0% |
| Kronos | 10% | −3.02 | 0% |
The yield signal is 93× more predictive than we were giving it credit for. VIX trend and StockScout VST proxy — our two highest-weighted signals — have near-zero predictive power over a 5-day horizon.
The macro suppressors (oil, geo stress, Kronos in scoring mode) are statistically significant, but negative — meaning they hurt scoring when used as direct inputs. The right use for them is as hard gates, not scoring signals.
Rather than replace the existing system, we added the backtest findings as a new quant_score signal carrying 15% weight — yield direction (70%) + SPY momentum (20%) + Kronos (10%). Data-driven augmentation, not wholesale replacement.
System 2: The Alpaca Active Trader
Philosophy: Make many small bets. Cut losers fast. Let Kronos guide direction.
This system runs on a $100,000 Alpaca paper account with three daily scan windows.
Lower Bar, More Trades
| Parameter | AI-Trader | Alpaca Active |
|---|---|---|
| Entry threshold | CS ≥ 0.65 | CS ≥ 0.55 + Kronos ≥ 0.55 |
| Time horizon | 2–5 days | Intraday to overnight |
| Exits | Manual | Auto bracket: TP +5%, SL −3% |
| Trades per day | 0–1 | 3–6 |
| Max position | $10,000 | $2,000 |
| Max concurrent | Unlimited | 5 |
Signals (Yield-Heavy)
| Signal | Weight |
|---|---|
| Yield Direction | 35% |
| Sector Momentum | 20% |
| Kronos Direction | 20% |
| VST Proxy | 15% |
| Earnings Proximity | 10% |
Macro suppressors are soft inputs here, not hard gates. The system fires more frequently because it’s designed to generate data about algo performance — not to preserve capital with maximum caution.
Kronos: The AI Model Under the Hood
Kronos-mini is a time series foundation model from NeoQuasar (based on research from Tsinghua and MIT, presented at AAAI 2026). It takes 200+ days of OHLCV price data and outputs a direction signal from −1.0 (strong bearish) to +1.0 (strong bullish).
We run it every morning on the full watchlist. It’s been consistently the most stock-specific signal in the stack — it caught AMD’s post-earnings setup before the +16.8% move, called PLTR bullish before earnings, and flipped GOOGL from −0.908 to +0.323 the day after the post-earnings selloff settled.
It’s not perfect. The backtest showed it as a negative predictor when used as a scoring input — but as a directional gate (Kronos ≥ 0.55 required for Alpaca entry), it’s been consistently useful.
The First Week: What Actually Happened
Thursday May 7, 3:08 PM ET — with 22 minutes left in the trading session, the morning scan fired on 4 names:
| Trade | Shares | Entry | Signal |
|---|---|---|---|
| AMD | 4 | $405.70 | Kronos +1.000 (max bull), AMD earnings beat +16.8% AH |
| GOOGL | 5 | $394.52 | CS 0.608, Kronos +0.661 |
| AMZN | 7 | $271.76 | CS 0.587, Kronos +0.642 |
| DAL | 27 | $72.96 | CS 0.596, Spirit Airlines collapse thesis |
All four filled. AMD gapped up overnight on the earnings beat.
Friday May 8, 9:53 AM ET — AMD at +6.7%, past the +5% take-profit target. Manually closed for +$109.11.
Friday midday — AMD Kronos still at +1.000 (max bull). Re-entered 4 shares at $443.70.
Current status: All 4 positions open, equity +$202 from $100,000 start.
The Meta-Experiment
Both systems are running simultaneously. AI-Trader tracks swing signals and publishes them in the tradebook. Alpaca paper trades with real fills on real market prices.
After 2–3 weeks of data we’ll compare:
- Which system generates better risk-adjusted returns
- Where the signals agree and disagree
- Whether the lower-threshold active algo outperforms the high-conviction swing algo
The goal is to graduate Alpaca paper to Alpaca live once the algo proves itself.
Ray’s Signal Brief · signals.themenonlab.com · All positions are paper trades. Not financial advice.