HomeSection 15 — SMSD Failure Modes, Edge Cases & Anomaly Protocol

Section 15 — SMSD Failure Modes, Edge Cases & Anomaly Protocol

No doctrine is complete until it defines not only how it works in ideal conditions, but also how it must behave when reality becomes distorted, noisy, or structurally ambiguous. The Structural–Momentum Synchronization Doctrine (SMSD) is designed to operate under normal, trending, and transitional environments; however, markets occasionally enter rare states where the usual assumptions about structure, drift, or volatility can break down.

This section formalizes the failure modes, edge cases, and the Anomaly Protocol that GATS must follow whenever SMSD inputs become unreliable, contradictory, or structurally unstable.

15.1 Categories of SMSD Failure Modes

SMSD failure modes can be grouped into five primary categories:

  1. Momentum–Structure Conflicts (M vs D vs C contradictions)
  2. EMA Zone Distortions & Inversions (EAS instability)
  3. Timeframe Desynchronization (Daily vs M60 vs M240 misalignment)
  4. Volatility Anomalies (ATR shocks, DAATS instability)
  5. Data & Feed Irregularities (gaps, bad ticks, structural discontinuities)

The Anomaly Protocol defines exactly how GATS must respond when one or more of these categories is triggered.

15.2 Failure Mode 1 — Momentum–Structure Conflicts

This occurs when the three SMSD layers disagree in a structurally inconsistent way:

  • M (MACD 5 & MACD 2) indicates strong bullish or bearish momentum,
  • D (SDI: EMA 25 vs EMA 26) reflects opposite drift,
  • C (EMA 8) remains unconfirmed or oscillating.

Typical manifestations:

  • MACD flips bullish inside a deep bear structure (e.g., BEAR–8–A+).
  • SDI remains bearish while MACD flips bullish several times.
  • EMA 8 is briefly reclaimed intraday but fails on Daily close.

15.2.1 Anomaly Protocol — Momentum–Structure Conflicts

GATS must:

  • Treat M-only or M+D without C states as non-permissive.
  • Flag the instrument as being in a Reactive Countertrend Zone (RCZ).
  • Disable all new directional entries for that symbol.
  • Allow existing positions to be governed exclusively by DAATS and death-stops.

Under no circumstance may GATS override SS and enter based on momentum alone.

15.3 Failure Mode 2 — EMA Zone Distortions & Inversions

EMA zone distortions occur when the EMA stack loses structural clarity:

  • rapid flipping of EMA 8/15/25 around EMA 50,
  • EMA 50/89/140 knotted tightly together,
  • EAS oscillating between B and I within a short window,
  • PZ hopping across two or more key boundaries in rapid succession.

These events usually correspond to:

  • macro news shocks,
  • post-parabolic unwind phases,
  • range-trap environments near critical levels (e.g., EMA 200).

15.3.1 EAS Instability Rules

EAS is considered unstable when:

  • EAS changes classification (e.g., A → C → A → I) more than N times within a rolling window.
  • SR flips between BULL and TRANS or BEAR and TRANS frequently.
  • PZ crosses back and forth through EMA 50 or EMA 200 within a short number of bars.

15.3.2 Anomaly Protocol — EMA Distortions

When EAS instability is detected:

  • GATS must downgrade all SS events to Conditional-only (no fresh entries).
  • GATS may continue to hold existing trades under Nine-Laws protection.
  • Risk per trade may be auto-reduced at the portfolio level for that symbol/sector.
  • New SS confirmations must remain stable for a minimum number of Daily bars before re-enabling entries.

SMSD treats EMA distortion periods as environments where structure is under negotiation, not yet settled.

15.4 Failure Mode 3 — Timeframe Desynchronization

Timeframe desynchronization occurs when:

  • Daily SS = TRUE, but M60 structure shows persistent counter-moves,
  • M240 volatility expands violently without a corresponding Daily structural shift,
  • lower timeframes (M5/M15/M30) experience regime shifts that conflict with M60.

SMSD assumes that:

Lower timeframes respect higher timeframe structure most of the time.

When they do not, an anomaly is present.

15.4.1 Desynchronization Triggers

  • Repeated invalidation of M60 triggers despite SS = TRUE.
  • Large M240 ATR expansion with no SS break.
  • Frequent intraday reversals that hit intraday levels but not DAATS.

15.4.2 Anomaly Protocol — Timeframe Desynchronization

If desynchronization persists beyond a defined threshold:

  • GATS must reduce the frequency of attempts to re-enter after exit.
  • GATS may pause execution for that symbol for a fixed number of bars.
  • Daily identity (SR–PZ–EAS) must be revalidated before new SS conditions can be trusted.

This prevents GATS from “over-trying” to force trades through structurally noisy environments.

15.5 Failure Mode 4 — Volatility Anomalies

Volatility anomalies occur when:

  • ATR spikes suddenly due to macro news or unscheduled shocks,
  • ATR collapses abnormally (liquidity evaporation, holiday trading),
  • correlation regimes flip abruptly across multiple instruments (Law 1: CRTL events).

In these scenarios, ATR-based DAATS and DS may either:

  • become dangerously too tight (risk of premature exits), or
  • become too wide (excessive lag and capital exposure).

15.5.1 Anomaly Protocol — Volatility Shocks

When volatility anomalies are detected:

  • Law 3 (MSPL) applies superlinear adjustments to stops.
  • Law 2 (WDHDI) tempers abrupt changes to DAATS.
  • New entries may require a waiting period after the shock.
  • Risk per trade may be reduced by a volatility factor.

SMSD defers to the Nine-Laws Framework to decide how volatility anomalies are absorbed and normalized.

15.6 Failure Mode 5 — Data & Feed Irregularities

Data anomalies include:

  • gaps in feed data,
  • abnormal spikes (bad ticks),
  • incorrect OHLC values,
  • overnight structural gaps in derivatives or synthetic products.

These can cause:

  • erroneous EMA values,
  • incorrect MACD calculations,
  • artificial ATR spikes,
  • false SS triggers.

15.6.1 Anomaly Protocol — Data Integrity

GATS must incorporate:

  • data sanity checks before accepting new bars,
  • filters for X-sigma outlier bars relative to ATR or historical range,
  • automatic flagging of suspicious bars for manual or algorithmic review,
  • the ability to invalidate SS events that occur exclusively due to anomaly bars.

SMSD assumes clean data; if data reliability is compromised, SS must be suspended.

15.7 SMSD Anomaly Flags & States

SMSD introduces a simple flag system to indicate anomaly conditions:

  • Flag 0 — Normal: No anomalies. SMSD and Nine Laws operate normally.
  • Flag 1 — Structural Conflict: M, D, C disagree persistently.
  • Flag 2 — EMA Distortion: EAS/PZ unstable; zones knotted.
  • Flag 3 — Volatility Shock: ATR spike or collapse beyond thresholds.
  • Flag 4 — Data Irregularity: feed anomalies detected.

GATS must treat any non-zero anomaly flag as a cue to:

  • restrict new entries,
  • reinforce DAATS and DS logic,
  • possibly reduce risk allocation,
  • increase dependence on higher timeframe structure.

15.8 SMSD Failsafe Rule

If SMSD cannot verify structural synchronization with high confidence, GATS must assume that no valid SS exists.

This rule ensures:

  • SMSD never forces a trade out of uncertainty.
  • Non-participation is preferred to low-quality participation.
  • Capital is preserved when structural information is ambiguous or corrupted.

15.9 Edge Cases — Transitional & Reversal Structures

Some edge cases are not anomalies but transitional states:

  • Price reclaiming EMA 8 while still in a bearish SR (BEAR–6–B).
  • EAS moving from I → C → B → A gradually over time.
  • PZ shifting from 8 → 7 → 6 as a bottoming process begins.

In these cases:

  • SMSD does not treat the behavior as failure.
  • SS may eventually form and become valid.
  • GATS must wait until M, D, and C converge.

Transitional edge cases are handled by patience, not by forcing early entries.

15.10 Summary of Section 15

SMSD is a robust doctrine, but it must explicitly define what happens when its inputs, structures, or volatility assumptions break down. The Failure Modes & Anomaly Protocol guarantees that:

  • GATS will never trade aggressively in structurally ambiguous environments.
  • SS cannot be faked by temporary momentum or bad data.
  • EMA distortions, volatility shocks, and data anomalies trigger conservative responses.
  • The doctrine always defaults toward capital preservation over forced participation.

With this, SMSD is not only a synchronization model, but also a protective doctrine that knows when not to act — which is the highest form of discipline in institutional trading.