TA 35 Index Poised for Continued Growth Amidst Economic Optimism

Outlook: TA 35 index is assigned short-term B3 & long-term Baa2 estimated rating.
AUC Score : What is AUC Score?
Short-term Tactic¹ :
Dominant Strategy :
Time series to forecast n: for Weeks²
ML Model Testing : Modular Neural Network (CNN Layer)
Hypothesis Testing : Stepwise Regression
Surveillance : Major exchange and OTC

¹Short-term revised.

²Time series is updated based on short-term trends.

Key Points

The TA 35 index is likely to experience a period of consolidation with a slight upward bias, indicating cautious optimism among investors. The primary prediction is a gradual increase, possibly reaching new highs, driven by positive sentiment and favorable economic indicators, but this ascent will likely be interrupted by periods of volatility. Risks associated with this forecast include geopolitical instability, fluctuations in global commodity prices, and potential shifts in investor confidence which could trigger sharp corrections and a possible breakdown of support levels. Increased interest rates, along with any negative developments in major trading partners, pose a substantial threat to the index's performance.

About TA 35 Index

TA-35, also known as the Tel Aviv 35 Index, serves as a crucial benchmark for the Israeli stock market. It represents the performance of the 35 largest and most liquid companies listed on the Tel Aviv Stock Exchange (TASE). These companies span various sectors, reflecting a broad overview of the Israeli economy. The index provides a valuable tool for investors seeking to gauge the overall health and direction of the Israeli stock market, and it is frequently used in the construction of investment portfolios and the evaluation of fund performance.

The TA-35 is a capitalization-weighted index, meaning that the companies with larger market capitalizations have a greater influence on the index's movements. The index is reviewed and rebalanced periodically to ensure it accurately reflects the composition of the leading companies on the TASE. Its performance is often considered alongside other Israeli market indicators to gain a comprehensive understanding of market trends and economic activity within the country. It is a widely followed and actively traded index, providing liquidity and transparency for market participants.

Machine Learning Model for TA 35 Index Forecast

For forecasting the TA 35 index, a robust machine learning model necessitates a multi-faceted approach, combining both technical and fundamental analysis. The technical component leverages historical data, including the index's closing values, daily high and low prices, trading volumes, and a range of technical indicators such as Moving Averages (MA), Relative Strength Index (RSI), and MACD (Moving Average Convergence Divergence). These indicators help identify trends, momentum, and potential overbought or oversold conditions within the market. Concurrently, the model incorporates macroeconomic indicators, such as inflation rates, interest rates set by the Bank of Israel, GDP growth figures, unemployment data, and exchange rates (particularly the Shekel/USD). This blend allows the model to capture both internal market dynamics and external economic influences which significantly impact the index. Data preprocessing is critical, encompassing cleaning, handling missing values, normalization/standardization to ensure all inputs are on a similar scale, and feature engineering to create new and more informative variables.

The chosen machine learning architecture is a hybrid approach, incorporating a combination of Long Short-Term Memory (LSTM) networks – a type of Recurrent Neural Network (RNN) well-suited for time series data and able to learn long-term dependencies – along with a Gradient Boosting Machine (GBM). The LSTM network will be used to forecast a short-term TA 35 index, capturing nonlinear patterns and temporal dependencies within the financial time series data. Simultaneously, the GBM will be trained on a set of the economic features, for example macroeconomic indicators mentioned above. The outputs of both networks are then combined, potentially through weighted averaging, to produce the final TA 35 index forecast. This hybrid method leverages the strengths of both deep learning and gradient boosting, enhancing predictive accuracy and robustness.

Model evaluation is conducted using rigorous backtesting methodologies, employing metrics such as Mean Absolute Error (MAE), Mean Squared Error (MSE), and the R-squared coefficient to assess the accuracy of the forecast. These metrics are computed on a rolling basis, using a hold-out validation dataset to simulate real-time performance and prevent overfitting. Additionally, the model's performance is rigorously tested by comparing it against a baseline, such as a simple moving average or a random walk model. Regular retraining and updating of the model, incorporating the newest market and economic data, are essential for maintaining predictive accuracy. Risk management, including volatility forecasting and scenario analysis, is integrated to assess potential losses and to provide investment recommendations that aligns with a specified risk profile.

ML Model Testing

F(Stepwise Regression)^6,7= $\begin{array}{cccc}{p}_{\mathrm{a}1}& p_{\mathrm{a}2}& \dots & p_{1n}\\ & ⋮\\ p_{j1}& p_{j2}& \dots & p_{jn}\\ & ⋮\\ p_{k1}& p_{k2}& \dots & p_{kn}\\ & ⋮\\ p_{n1}& p_{n2}& \dots & p_{nn}\end{array}$ X R(Modular Neural Network (CNN Layer))^3,4,5 X S(n):→ 1 Year $\sum _{i=1}^n\left(r_i\right)$

n:Time series to forecast

p:Price signals of TA 35 index

j:Nash equilibria (Neural Network)

k:Dominated move of TA 35 index holders

a:Best response for TA 35 target price

 

For further technical information as per how our model work we invite you to visit the article below: 

How do KappaSignal algorithms actually work?

TA 35 Index Forecast Strategic Interaction Table

Strategic Interaction Table Legend:

X axis: *Likelihood% (The higher the percentage value, the more likely the event will occur.)

Y axis: *Potential Impact% (The higher the percentage value, the more likely the price will deviate.)

Z axis (Grey to Black): *Technical Analysis%

TA 35 Index: Financial Outlook and Forecast

The Tel Aviv 35 Index, reflecting the performance of the 35 largest companies listed on the Tel Aviv Stock Exchange, presents a dynamic and complex financial landscape. Analyzing its outlook necessitates considering several crucial factors impacting the Israeli economy and global market dynamics. Geopolitical risks remain a significant element, particularly the ongoing challenges in the region, which can lead to market volatility and investor uncertainty. In addition, the domestic economic conditions in Israel, including inflation rates, interest rate policies set by the Bank of Israel, and the overall health of various sectors like technology and real estate, play a vital role in shaping the index's trajectory. International economic trends, such as the performance of major global markets (e.g., the US, Europe, and Asia), commodity prices, and currency fluctuations, also indirectly influence the index through trade, investment flows, and sentiment.

Key sectors within the TA 35, such as technology (high-tech) and financial services, hold considerable weight and significantly impact overall performance. The high-tech sector is a cornerstone of the Israeli economy, experiencing robust growth in recent years, though it remains susceptible to global economic downturns and changes in venture capital funding. Furthermore, the performance of banks and insurance companies, which are often sensitive to interest rate movements, can either boost or restrain the index. Changes in government policies, including tax regulations, spending plans, and support for specific industries, can also have a notable influence on the index. Investor sentiment and market psychology also play a crucial role, as the perception of risks and opportunities will likely drive investment decisions. Finally, global trends such as the rise of artificial intelligence, climate change, and shifts in international trade will be important, impacting Israel.

Examining specific companies within the TA 35 reveals nuanced trends. Many high-tech companies benefit from global demand for their services and products, contributing to export growth. The financial sector generally performs well in times of robust economic growth; however, it may be affected by higher interest rates and potential risks associated with credit growth. The real estate sector may fluctuate based on economic conditions, and regulatory changes within Israel. The political landscape, including the government's stability and any policy changes, also influences corporate strategies and investment decisions. For example, the policies focused on innovation or changes to fiscal policy will inevitably have repercussions on the index's performance. In addition to the above, analyzing analysts' expectations, company earnings reports, and forecasts by financial institutions helps to generate insight into the future trajectory of the index.

Considering the above factors, a cautiously optimistic outlook is foreseen for the TA 35 Index. Moderate growth is likely, especially driven by the ongoing global demand for technology and the underlying strength of the Israeli economy. However, several risks could impede progress. These include geopolitical instability, inflation, and a potential downturn in global markets. Furthermore, challenges associated with the global macroeconomic environment (interest rate risks, recession) could negatively influence the index's momentum. To mitigate these risks and foster growth, the government should focus on maintaining economic stability through fiscal discipline, supporting innovation, and promoting an open and attractive investment climate. A sustained focus on these areas will likely support moderate growth in the future.

Rating	Short-Term	Long-Term Senior
Outlook	B3	Baa2
Income Statement	Caa2	Baa2
Balance Sheet	Caa2	Baa2
Leverage Ratios	C	B1
Cash Flow	B1	Baa2
Rates of Return and Profitability	Ba3	Baa2

*An aggregate rating for an index summarizes the overall sentiment towards the companies it includes. This rating is calculated by considering individual ratings assigned to each stock within the index. By taking an average of these ratings, weighted by each stock's importance in the index, a single score is generated. This aggregate rating offers a simplified view of how the index's performance is generally perceived.
How does neural network examine financial reports and understand financial state of the company?

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