
Reflexivity in Financial Markets – How Feedback Loops Drive Asymmetry
Reflexivity is more than a Soros buzzword—it’s a market structure principle that helps explain both bubbles and crashes, trend persistence, and volatility clusters.
Asymmetric Investment Returns is a blog authored by Mike Shell since 2006, covering topics about asymmetric investing and trading for asymmetric risk/reward in pursuit of asymmetry.
Reflexivity is more than a Soros buzzword—it’s a market structure principle that helps explain both bubbles and crashes, trend persistence, and volatility clusters.
Systematic flows can move markets far more than headlines. Recognizing the impact of volatility-targeting strategies, CTA trend signals, and leveraged ETF rebalancing allows traders to step into the chaos with a defined edge.
Morningstar’s model says the U.S. equity market is undervalued by 6.7%. But valuation without a clear exit is not a strategy—it’s a liability.
Sector dispersion is a gift to the asymmetric investor. When sectors diverge this sharply in trend, volatility, and valuation, the environment rewards those who are willing to rotate tactically and structure trades to capture exponential upside while controlling downside risk. We may use this data to identify setups with capped downside and high upside optionality—hallmarks of true asymmetry.
When industry performance disperses this widely, the opportunity for asymmetric positioning multiplies. Whether through long/short pairs, structured options, or sector rotation with predefined exits, we may use this dashboard data to seek positive asymmetry—capping downside while preserving exponential upside. At Shell Capital, this is the edge we pursue in dynamic markets.
You wouldn’t know it from watching the VIX index alone, but something interesting is happening beneath the surface. The VIX futures curve — the structure that really drives volatility-linked products like VXX, VIXY, and UVXY — is showing signs of indecision. Here's what it means for asymmetric hedging.