News Reaction Failure Analyzer

Overview

Implements step 2 of Jason Shapiro's COT contrarian process: once a market is flagged as crowded (

cot-contrarian-detector

, step 1), check whether it FAILED to react to news that should have rewarded the crowd. A crowded-long market that doesn't rally on genuinely bullish news, or a crowded-short market that doesn't sell off on genuinely bearish news, is the core behavioral tell that the crowd has run out of buying/selling power — this is the confirmation step that turns "crowded" into a contrarian setup candidate (steps 3-5, still manual: price-action confirmation, entry, exit).

Why this isn't a naive failure-ratio check: an earlier design flagged "news failure" whenever fewer than half the relevant events "responded" — but under pure noise, roughly 69% of individual events fail to respond by chance, so that rule would CONFIRM on random noise 48-83% of the time depending on sample size. This skill instead requires the market to have moved significantly against the crowd's favorable news (a drift- significance test with a Monte-Carlo-verified null false-positive bound), never merely "didn't respond enough." See

references/news-failure-patterns.md

for the full statistical rationale.

When to Use This Skill

English:

"Did the market shrug off [event] even though [asset] is crowded long/short?"
"Run a news-failure check on [symbol]"
"Is [symbol] confirmed for a Shapiro-style contrarian setup?"
After
```
cot-contrarian-detector
```
flags a market CROWDED_LONG / CROWDED_SHORT and the user wants to move to step 2

Japanese:

「この市場は好材料に反応しなかった？」
「COTで偏っているこの銘柄のニュース失敗を確認して」

Do NOT use when:

The market isn't crowded (NEUTRAL classification) — this skill refuses fail-closed without an explicit
```
--direction
```
override
No curated events JSON exists yet — WebSearch must run first (Phase 2 below); never fabricate events or URLs to get a verdict

Prerequisites

FMP API Key: Required. Set
```
FMP_API_KEY
```
or pass
```
--api-key
```
. Used for price data only (
```
stable/historical-price-eod/light
```
) — coverage varies by symbol; see
```
references/price-source-map.md
```
.
Python 3.9+ with
```
requests
```
installed.
WebSearch access to curate the events JSON (Phase 2). Skill degrades gracefully without it (states the limitation; never fabricates events).
Optional: a
```
cot-contrarian-detector
```
JSON report (
```
--detector-json
```
) to auto-resolve symbol + direction, or supply
```
--direction
```
explicitly.

Workflow

Phase 1: Obtain symbol + direction

From a

cot-contrarian-detector

report (

--detector-json

, symbol looked up in

markets[]

) or directly from the user (

--symbol

--direction

). A

NEUTRAL

classification, a symbol missing from the report, or a report older than

--max-detector-age-days

(default 10) all refuse fail-closed with a specific reason — only an explicit

--direction

overrides.

Phase 2: Curate the events JSON via WebSearch

Search news in the evaluation window (

--window-days

, default 10) using the 4-tier source hierarchy (issuer/primary → SEC/official stats → wire → portal — see

references/news-failure-patterns.md

). Write findings into an events JSON from

references/news-failure-patterns.md

's template —

event

event_time

(ISO8601 with explicit UTC offset),

source_url

source_tier

expected_impact

(BULLISH/BEARISH) per event.

Never fabricate events or URLs. WebSearch unavailable → state it explicitly; proceed without an events JSON only if the user accepts an

INSUFFICIENT_EVIDENCE

result (reason

no_events_provided

) — the CLI never raises an exception for a missing events file, it always exits 0 with a documented reason.

Phase 3: Run the CLI

bash

python3 skills/news-reaction-failure-analyzer/scripts/analyze_news_reaction.py \
  --symbol B6 --detector-json reports/cot_crowding_2026-07-12.json \
  --events-json reports/nrf_events_B6_2026-07-12.json \
  --output-dir reports/

The script fetches the price series (documented fallback chain — futures symbol first, ETF proxy if 402/restricted or

rows == 0

; see

references/price-source-map.md

), computes effective dates / returns / z-scores per event, clusters events whose 3-trading-day windows overlap (independence guard), and synthesizes the verdict.

Phase 4: Present verdict + handoff

Present the verdict, aggregate stats (

drift_stat

responded_ratio

), and the evidence table (per-event returns/z-scores/reaction labels, with any

dropped_events

reasons shown — never silently hidden). If a proxy (

run_context.proxy_used

) was used, note the tracking-error caveat.

Emit a handoff block for

contrarian-setup-gate

(#241, not yet built):

json

{"news_failure": {"verdict": "CONFIRMED", "confidence": "HIGH", "report_path": "reports/nrf_B6_2026-07-12.json"}}

Output

JSON:

reports/nrf_<symbol>_<as-of-date>.json

—

schema_version

symbol

direction

expected_direction

actual_reaction

(

FAILED_TO_RALLY

FAILED_TO_SELL_OFF

RALLIED

SOLD_OFF

MIXED_REACTION

NO_DATA

verdict

confidence

relevant_events_used

aggregate

(mean_z3/drift_stat/responded_ratio),

evidence[]

dropped_events[]

run_context

Markdown:
```
reports/nrf_<symbol>_<as-of-date>.md
```
— human-readable verdict, aggregate stats, evidence table, dropped-events table, proxy caveat (if used), and methodology footnote.

Guardrails

CONFIRMED is not a trade signal. It confirms step 2 of 5 — price- action confirmation (step 3), entry (step 4), and exit (step 5) are still manual and still required before any position.
INSUFFICIENT_EVIDENCE never advances the pipeline. Fewer than
```
--min-events
```
(default 3) usable relevant event clusters, a missing detector report, or a detector vintage (
```
data_date
```
) that's missing, unparsable, dated after
```
--as-of
```
, or older than
```
--max-detector-age-days
```
(stale), a
```
NEUTRAL
```
classification without an explicit override, or no working price source all produce this verdict — never a crash, never a forced call on inadequate data.
COT publication lag. COT data is 3-9 days old by the time it's read (see
```
cot-contrarian-detector
```
); news-failure evidence should be read in that context, not as same-day confirmation.
Counter-direction events are context only — shown in the evidence table but excluded from the verdict (only events whose
```
expected_impact
```
matches the crowd's
```
expected_direction
```
count).
Proxy-based prices are noted, not hidden. When an ETF proxy was used (
```
run_context.proxy_used
```
), the report says so — tracking error, expense drag, and roll-timing differences make the reaction-direction read approximate, not exact.
Residual statistical risk under extreme correlation. The verdict's null false-CONFIRMED rate is hard-verified under i.i.d. noise (<8%) and under a realistic residual-correlation stress (AR(1) ρ=0.1, <10%). Under an intentionally extreme correlation stress (lag-1 ρ=0.3 across non-clustered event windows — roughly 10x liquid-futures empirical autocorrelation), the measured null rate rises to ~11-13%. This is a documented v1 limitation, not a silent gap — see
```
references/news-failure-patterns.md
```
for the full numbers. Users who want the stricter <10% margin even under that stress can pass
```
--drift-z 1.75
```
(at the cost of missing some genuine news-failure signals, not just noise).
Not investment advice. Research/educational purposes only.

Resources

references/news-failure-patterns.md

Full methodology: what qualifies as a relevant event, the 4-tier source hierarchy, worked examples, the events-JSON curation guide + template, and the verdict-threshold rationale (why drift-significance, not a naive ratio; the Monte-Carlo-verified null bounds).

references/price-source-map.md

Per-market price-source fallback chain, verified/402/0-rows status (live- probed at implementation time), ETF-proxy caveats, and markets with no viable source (documented

no_price_source

cases: VX, ZQ, HO, all agri on this key).

When to Load References

First use / explaining the methodology: Load
```
references/news-failure-patterns.md
```
Explaining why a market has no verdict (no_price_source): Load
```
references/price-source-map.md
```
Regular execution: References not needed for the CLI itself — needed for Phase 2 (events curation) and for explaining results to the user

news-reaction-failure-analyzer

NPX Install

Tags

SKILL.md Content