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does any other "fixes" come to your mind regarding data analysis in matlab? like something along the pinv type fix?
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Can't think of a major fix right now.
If there are higly correlated inputs one could also use
Principal components analysis (PCA)
Here is the Matlab link:
matlab
There are lot of good tutorials on it online.
One interesting anecdote (this is not first hand - you might be able to verify or deny it) I read at wilmott was that DE Shaw used it as their first strategy to trade a basket of stocks, becasue some of the components were predictable. But since then, it has been eliminated.
Once I checked out the strategy on one sector and it was seemed pretty useless.
So it is unlikely that OP's strategy would be very scaleable....but maybe he is onto something.