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.

Sunday, February 15, 2015

2015.02.13 VIX Cycle Model Chart

2015.02.13 VIX Cycle Model Chart


















The VIX cycle model suggests continued upward pressure on VIX, especially given the current Z-score of 3.4. The usual caveat is that this model is useful for estimating longer term direction rather than day-to-day swings in price.  Back in August of 2014, the VIX cycle model suggested a gradual rise into 2015. The timing was more accurately predicted than the price levels. That model run is on the blog and also shown below.  The difference between the actual and predicted is an important input into a neural net model I use, since it contains the cyclical information, but there are other factors used in the neural net model that clearly influence short term behavior which cannot be captured by cyclical analysis.


2014.08.01 VIX Cycle Model Chart












Friday, February 13, 2015

2015.02.13 Gold Cycle Model Chart

















Once again, gold prices are lagging the predictive curve, this time by two sigma units. This suggests that pressure for a reversal is building based on historical price cycles.  This is similar to what we observed at the end of October last year as you can see below and on the blog. Hopefully this is also helpful to readers learning to interpret predicted vs actual divergences by means of the Z-score. One other observation to take into account: at this point in time the predictive curve is rising, if the gold price were to drop below $1200 in the next few days, the Z-score would rapidly rise to greater than 3, an unlikely event by the model parameters, suggesting that $1200 +/- is a base price for gold at this time.


2015.01.16 Gold Cycle Model

2014.10.31 Gold Cycle Model

Sunday, February 8, 2015

2015.02.06 XOI.X Cycle Model Chart

2015.02.06 XOI.X Cycle Model Chart



















This cycle model suggests that index prices have gotten a bit ahead of themselves, with the Z-score close to 2 sigma units suggesting a reversal. According to the model,  reversal is highly probable in the next few weeks. This cycle model suggests a maximum in the index occurring in April 2015. This is likely due to strong seasonal cycle components.

Saturday, January 31, 2015

2015.01.30 VIX Cycle Model Chart

2015.01.30 VIX Cycle Model Chart


















The VIX cycle model seems to have predicted a multi-month turning point for volatility. The model is suggesting higher average volatility  going forward into 2015 but the caveat is that it does not capture short term fluctuations in the negative or positive directions.  A previous iteration of the model is shown below and here on the blog.



2014.12.19 VIX Cycle Model Chart

Wednesday, January 21, 2015

2015.01.21 Silver Cycle Model Chart

2015.01.21 Silver Cycle Model Chart

















The silver cycle model is performing well, and continues to suggest higher prices into the Spring Equinox.  By chance, the predicted and actual price curve are coincident.  Note the Z-score approaching zero. I will make a long term silver cycle model chart and data available by the end of this week. Some previous iterations of the model are shown below and here on the blog.


2015.01.06 Silver Cycle Model Chart


















2014.10.31 Silver Cycle Model Chart

Saturday, January 17, 2015

2015.01.16 Gold Cycle Model Chart

2015.01.16 Gold Cycle Model Chart

















The gold cycle model continues to suggest higher gold prices going forward. I wanted to illustrate the use of a Z-score using the differences between the current chart and a previous iteration of the model from October, 2014 shown below and also here in the blog. The high Z-score in the chart below, which passed "three sigma" implied a high probability of reversal, which indeed occurred.  Given the reasonable performance of this commodity model, I will be providing an extension of the model to 2025 as I did with the XOI.X model.

2014.10.31 Gold Cycle Model Chart

Saturday, January 10, 2015

2015.01.09 VIX Cycle Model Chart

2015.01.09 VIX Cycle Model Chart

















The VIX cycle model, while it does not capture short-term spikes in VIX seems to have predicted a smoothed rise in VIX beginning in the third quarter of 2014. The Z-score approaching +2 sigma suggests continued pressure for rising values through 2015. It may be a coincidence, but the VIX curve now parallels the silver price pseudocycles which also emerged for 2015.  A previous iteration of the model is shown below and here on the blog. I would also note that comparing and contrasting the two charts, one can see that timing of longer-term directional change is better predicted than price magnitude.

2014.09.12 VIX Cycle Model Chart

Tuesday, January 6, 2015

2015.01.06 Silver Cycle Model Chart

2015.01.06 Silver Cycle Model Chart


















The silver cycle model suggests a rising price with a maximum before Spring Equinox in 2015.  The pseudo-cyclical structure continues to emerge.  A previous iteration of the model is shown below and here.



2014.10.31 Silver Cycle Model Chart