The Three Tests
1. Flash Crash (2010) — The Speed Test
If F_B detects the structural lock before the lightning crash on May 6, the model proves it is faster than the high-frequency algorithms that caused the crash.
| Success norm | LOCKED signal (brief) between May 1–5 |
| Our result | LOCKED on Apr 27 and Apr 29 — 9 days before May 6 |
| Verdict | Exceeded — earlier detection |
- Apr 27, 29: LOCKED (Strength 6) + fb_dominance True
- May 6: Flash Crash (-7.3% drawdown)
2. Bear Market (2022) — The Reliability Test
In 2022, the market fell slowly by "stairs." If Persistence stays elevated, the model proves it can say "don't enter yet, the danger lasts" over the long term.
| Success norm | Level 2 or 3 lasting with Persist > 20 during decline |
| Our result | Persistence max 79 days; 31 days at level 2–3 (Stress/Critical) |
| Verdict | Passed — sustained stress signal |
- Jan–Oct: Persistence rises to 79 (level 0 dominant, structure SYMMETRIC)
- 31 days at level 2–3 during the worst phases (Jan, Feb, Aug, Sep, Oct)
3. Rebound (Dec 2018 – Jan 2019) — The Return to Normal
The most important test to avoid false alarms. If the system returns to SYMMETRIC when the market rebounds, the model proves it does not stay "stuck in panic mode."
| Success norm | Return to Green (Symmetric) by mid-January 2019 |
| Our result | Level 0 (Normal) from Jan 9; SYMMETRIC throughout |
| Verdict | Passed — clean transition |
- Dec 24: Level 2, -19.4% drawdown
- Jan 9: Level 0 (Normal) — rebound confirmed
For institutional clients: "Our model is not based on one crisis — it survives history." LSRI V4 has been validated across three fundamentally different stress regimes: velocity (Flash Crash), endurance (Bear 2022), and recovery (2018–2019).
Summary
| Flash Crash 2010 | LOCKED before May 6 |
| Bear 2022 | Persistence elevated (max 79); 31 days at Stress/Critical |
| Dec 2018 – Jan 2019 | Return to Normal by mid-January |
Calibration: fb_B = 2.2, Strength > 3 for LOCKED red badge.
LSRI is data-only. Backtests are for validation purposes. Not investment advice.