Sunday, August 23, 2015

2015.08.21 XOI.X Cycle Model Chart

2015.08.21 XOI.X Cycle Model Chart


















The index price dropped well below the prediction, suggesting a similar situation as occurred in December, 2014 which was followed by a very rapid reversal. Below and on the blog is show the predictive cycle model run from late 2014.


2014.12.26 XOI.X Cycle Model Chart

Saturday, August 15, 2015

2015.08.14 DJIA Cycle Model Chart

2015.08.14 DJIA Cycle Model Chart


















Given the DJIA cycle model prediction from 2015.07.17 shown below and on the blog, the model is performing well. Given my previous experience with cyclically structured equity models, while I'd like to state we have seen the top in the DJIA for a couple of years at least, it's prudent to reiterate that this only means that there are strong secular, decadal, and yearly/seasonal cycles converging and all pointing to lower index prices. If the Fed restarts QE, all bets are off.



2015.07.17 DJIA Cycle Model Chart

Saturday, August 8, 2015

2015.08.07 DJIA Cycle Model Chart


2015.08.07 DJIA Cycle Model Chart
















The new DJIA cycle model seems to be performing well. I would caution readers that the previous DJIA models tested well on out-of-sample tests, but then managed to crash and burn. A reasonable interpretation is that from a historical  business cycle perspective, dating to 1896. there is strong downward pressure on the DJIA.  The first iteration of the model is shown below and here on the blog.


2015.06.12 DJIA Cycle Model Chart

Monday, August 3, 2015

2015.08.03 Silver Cycle Model Chart

2015.08.03 Silver Cycle Model Chart


















The silver cycle model is suggesting higher prices peaking in the October, 2015 time frame. The model is performing relatively well, and given we are at an inflection point, it will be informative to see if the model holds over the next two months. The previous iteration of the model, which suggested a drop in price,  is shown below and here on the blog.


2015.06.04 Silver Cycle Model Chart

Sunday, July 26, 2015

2015.07.24 XOI.X Cycle Model Chart

2015.07.24  XOI.X Cycle Model Chart

















The XOI.X index cycle model is performing well. The model is suggesting an upwards correction before the continued drop in index prices towards the low in the October/November 2015 time frame. A previous iteration of the model is shown below and here on the blog.



Sunday, July 19, 2015

2015.07.17 DJIA Cycle Model Chart

2017.07.17 DJIA Cycle Model Chart
















For new readers, please note that the previous DJIA cycle model failed, so all the usual caveats apply.  The previous iteration suggested slight upward pressure on the index, which has now resolved. Going forward, the model suggests increasing downward pressure on the index going into Fall, 2015. For this model on a historical basis, the absolute value of the Z-score >3 has been a good predictor of a reversal. A previous iteration of the model is shown below and here on the blog.


2017.06.12 DJIA Cycle Model Chart

Friday, July 17, 2015

2015.07.15 Gold Cycle Model Chart

2015.07.17 Gold Cycle Model Chart

















The gold cycle model stubbornly suggests higher gold prices into the Fall, 2015. At the end of 2008, there was a similar period of time where the z-score was just over 4 and a reversal occurred. You can see this in the long term chart area. The previous iteration is shown below and here on the blog



2015.06.05 Gold Cycle Model Chart

Sunday, July 12, 2015

2015.07.10 VIX Cycle Model Chart

2015.07.10 VIX Cycle Model Chart

















The VIX cycle model suggests increasing upward pressure on the VIX index going into the Fall of 2015. As you can see from the previous iteration of the model shown below and here on the blog, the Z-score approaching 2 on the last iteration suggested a reversal in the index which has occurred.  The current Z-score is close to zero, suggesting the index will remain, on average, around the 14-17 range until September 2015.


2015.07.10 VIX Cycle Model Chart

Saturday, June 27, 2015

2015.06.28 Silver Cycle Model Chart

2015.06.28 Silver Cycle Model Chart


















The silver cycle model is performing relatively well, and suggests increasing upward pressure on silver prices beginning in the August 2015 time frame. As noted previously on the blog and below, the silver price did drop in accordance with the model prediction.



2015.06.04 Silver Cycle Model Chart

Saturday, June 20, 2015

2015.06.19 XOI.X Cycle Model Chart

2015.06.19 XOI.X Cycle Model Chart

















The XOI.X cycle model is performing well, and suggests continued downward pressure on the index price. A previous iteration of the model is shown below and here on the blog. 


2015.02.06 XOI.X Cycle Model Chart

Sunday, June 14, 2015

2015.06.12 DJIA Cycle Model Chart

2015.06.12 DJIA Cycle Model Chart

















At the risk of another modeling disaster, here is the "new and improved" DJIA model. Readers will recall the agonizing demise of the last DJIA cycle model.  I added cyclical frequency modulation to the usual amplitude modulation and the model backtested quite well, predicting the last close of the DJIA within 200 points from data ending 31DEC2014. Take it with copious salt and spices, and remember that all models are wrong but some are useful. On the plus side, the model goes back to 1896, so there are strong secular and multidecadal business cycles in play. On the other hand, there are shorter cycles that now have more error, which I am attributing to liquidity factors in the past 10 years that are new to the structure.

Friday, June 5, 2015

2015.06.05 Gold Cycle Model Chart

2015.06.05 Gold Cycle Model Chart



















According to the model, the gold price is reaching a highly "oversold" level and there is increasing pressure for a rise in prices going into the Solstice and beyond. Readers are urged to study the long term gold cycle chart here to have an idea of how often the Z-score reaches above this level. 

Thursday, June 4, 2015

2015.06.04 Silver Cycle Model Chart

2015.06.04 Silver Cycle Model Chart



The silver cycle model suggests mild downward pressure on silver prices until the August 2015 time frame. A model run from early this year shows what to expect with extreme Z-scores. In March, 2015 a major divergence between the predictive curve and the actual price is seen, suggesting a very strong possibility of reversal, which subsequently occurred.  This is shown below and here on the blog.  And finally, a reminder that "all models are wrong, some are useful."



2015.02.23 Silver Cycle Model Chart

Friday, May 29, 2015

2015.05.29 VIX Cycle Model Chart

2015.05.29 VIX Cycle Model Chart


















The VIX cycle model continues to suggest a gradual increase in VIX levels with an upward acceleration in the September 2015 time frame. Below is the previous iteration of the model, also shown here on the blog. 


2015.03.06 VIX Cycle Model Chart

Saturday, May 16, 2015

2015.05.15 Gold Cycle Model Chart

2015.05.15 Gold Cycle Model Chart

















The gold cycle model continues to suggest increasing upward pressure on prices. A previous iteration of the model is shown below and here on the blog.





2015.04.27 Gold Cycle Model Chart


















"All models are wrong, some models are useful."

Saturday, May 9, 2015

2015.05.08 XOI.X Cycle Model Chart

2015.05.08 XOI.X Cycle Model Chart

















The XOI.X cycle model suggests we may have passed a local maximum in the index price, and there is strong long term pressure for lower prices going forward into October 2015.  Looking at a previous iteration of the model shown below and here on the blog, note the divergence between the predicted and actual curve at the last data point. At the time, this suggested some downward pressure on the price index, which in fact occurred.



2015.02.24 XOI.X Cycle Model Chart

Thursday, May 7, 2015

2015.05.07 Silver Cycle Model Chart

2015.05.07 Silver Cycle Model Chart

















I was asked if these models provide trading 'signals.' The most reliable signals within a short time frame relate to the Z-score. With the usual caveat that this is not trading advice, an example of how to use the information from this kind of model can be seen by comparing the chart below, also shown on the blog here, where the Z-score approached 3 in the March 2015 time frame. The large divergence suggested a very high probability of a reversal, which in fact occurred within three weeks. Of course, this does not always occur, but it is a game of chance and risk management.  Currently, the model curve suggests lower prices.


2015.02.23 Silver Cycle Model Chart

Wednesday, May 6, 2015

2015.05.06 VIX Cycle Model Chart

2015.05.06 VIX Cycle Model Chart

















The VIX cycle model continues to suggest an increase in the magnitude of the index. As you can see below, the model has undergone a phase change going forward, nevertheless it is the same model run with updated data. The key point is that if you look at the previous VIX cycle model shown below, you will note that it achieved a Z-score > 3 which for this model strongly suggests a high chance of reversal.  The earlier model run is also presented here.


2015.03.20 VIX Cycle Model Chart

Monday, April 27, 2015

2015.04.27 Gold Cycle Model Chart

2015.04.27 Gold Cycle Model Chart

















The gold cycle model continues to show increasing upward pressure on prices with a Z-score strongly suggesting an upward bias in prices going forward. I have had some questions regarding the predictive curve. This cycle model, like all of the cycle models, is adaptive in that the model is updated with new data and run before the output is reported on the blog. The predictive curve is the statistically most likely path going forward, however, it is approximate insofar as the model has error.  Therefore, as new data is added, there is some "stretch" allowed given the error of the various cycle parameters. This is why over time the shape of the predictive curve may change.  The previous iteration of the model is shown below and here on the blog.


2015.04.02 Gold Cycle Model Chart

Saturday, April 25, 2015

2015.04.24 XOI.X Cycle Model Chart

2015.04.24 XOI.X Cycle Model Chart

















The XOI.X cycle model correctly predicted the rise of the index to a local maximum in the April 2105 time frame. If the model is correct we should expect a fall in the index price beginning in the early May 2015 window.  A previous iteration of the model is shown below and here on the blog.


2015.03.13 XOI.X Cycle Model Chart

Sunday, April 5, 2015

2015.04.02 Gold Cycle Model Chart

2015.04.02 Gold Cycle Model Chart



















The gold cycle model continues to suggest upward pressure on prices going into 2016. It appears we are at the end of a 16 + month basing process. A previous iteration of the model is reproduced below and is shown here on the blog.


2015.03.05 Gold Cycle Model Chart

Saturday, March 28, 2015

2015.03.27 Silver Cycle Model Chart

2015.03.27 Silver Cycle Model Chart


















The silver cycle model is performing reasonably well, and suggests that the March/April maximum in price may have already passed. We are looking for a minimum in the July/August time frame at $1400.  Below is the silver cycle model run from 2014.12.12, also on the blog here.


2014.12.12 Silver Cycle Model Chart

Sunday, March 22, 2015

2015.03.20 VIX Cycle Model Chart

2015.03.20 VIX Cycle Model Chart

















The VIX cycle model suggests rising pressure for a strong VIX reversal to the upside, with a Z-score >3.  Since June, 2014 there have been a series of "higher lows" in line with the cycle model, which unfortunately cannot capture the up and down short term spikes.

Sunday, March 15, 2015

2015.03.13 XOI.X Cycle Model Chart

2015.03.13 XOI.X Cycle Model Chart

















Interpreting the model at this juncture reveals a few possibilities. In the immediate time frame, there is increasing upward pressure on the index price. However, it may also be that the peak might have been a couple of months early compared to the model prediction. Given the past performance of the model, taken together it suggests that Fall 2015 should encompass a low in the index curve, and another turning point.  Previous iterations of the model are available on this blog.

Thursday, March 5, 2015

2015.03.05 Gold Cycle Model Chart

2015.03.05 Gold Cycle Model Chart

















The gold cycle model suggests another inflection point in the price curve occurring at the end of April, which if the model continues to perform well, suggests strong cyclical pressure for a price rise in that time frame. The Z-score is still below 2, so from that aspect, the model is still performing within its limitations.

Wednesday, February 25, 2015

2015.02.24 XOI.X Cycle Model Chart

2015.02.24 XOI.X Cycle Model Chart
















The XOI.X index is a bit ahead of itself but on track for a rise into April. There are no changes to the long term model.  A previous iteration of the model is shown here on the blog and below.


2014.10.17 XOI.X Cycle Model Chart

Monday, February 23, 2015

2015.02.23 Silver Cycle Model Chart

2015.02.23 Silver Cycle Model Chart

















The cycle model for silver suggests upward pressure in silver prices over the next few weeks. To help interpret the Z-score, I have placed a long term model going back to 1968 in the Long Term Cycle Charts page.

Friday, February 20, 2015

2015.02.20 Gold Cycle Model Chart

2015.02.20 Gold Cycle Model Chart


















The gold model Z-score increased to 2.4 from the previous iteration. This suggests increasing pressure for a reversal to the mean, in this case a rise towards the $1300 level. A reader asked how to interpret the Z-score, and in answer I have also posted a long term model ranging from 1968 to 2016.

















If you click on the chart to get the higher resolution graphic, you will see that on a historical basis the Z-score has been >3 about a dozen times, out of 11909 data points in the time series.   This is why in my last gold cycle model chart update I mentioned that it was unlikely that the model would breach a Z-score of 3. For convenience, I will also add the model to the long term chart section.   However, it also becomes more likely that the model might fail to converge unexpectedly and annoyingly. According to the cycle model, we seem to be at a major turning point for gold, so we are in the "make or break" time for the model.  Hence, I will try to keep weekly updates current.