Saturday, March 24, 2012

2012.03.23 Weekly DJIA $ Gold $ Silver

Very Short Time Frame Predictions

 The Gold model has been working well, now  predicting significantly lower prices over the next month. $1450 +/- a lot looks possible.

The Silver model is also working well, suggesting some upward pressure on Silver - to the  upside of $35/oz in the first few weeks of April.

The DJIA model is probably broken - but I will continue to run it and post it so I can look like a genius if the DJIA drops 2000 points in a short time frame.  I don't have time to even think about constructing another DJIA model for at least  the next few months.

The DJIA model insists on treating the current  actual price curve as "noise" while the prediction curve bounds downwards. I will explain this briefly. If the model detects highly non-random time series behavior during a window of analysis, it weighs those points less than if the time series is exhibiting its usual and customary non-linear signatures. So - as long as the DJIA time series that "takes off" the predictive curve continues to exhibit an odd signature, the model will continue to discount them.  You don't have to be a mathematician to appreciate that the "texture" of the time series of the DJIA is much smoother than usual. That is exactly what is being translated into something the model can handle. This is not an apology for a bad model - it is what it is. There were very good reasons to include that module in the model.  As long as the model continues to run - I'll keep posting it.

Have a nice early Spring or Fall week!

Visit for free sample trading model downloads. 

1 comment:

Paolo said...

I usually refrain from commenting on the larger economic picture, as there are others much better suited than I. In light of the strange case of the failing DJIA model, here's a few thoughts on the Future from a US-centric perspective.

In 1925, money call rate were as low as they are now. The failure of the Fed was not, as Bernanke states, not having "printed enough money" after the implosion in 1929, but having "printed too much money" in the mid-1920's resulting in a series of malinvestments that could only be profitable at artificially low interest rates.

Readers having some knowledge of Austrian economics will recognize the familiar theme.

I have mentioned in the past that the continuing rise in equities might represent a very early stage of the "crack-up" boom as explained by Von Mises. Interest rates are discouraging savings, so new capital is only available via, for the moment, an offsetting generation of debt.

Meanwhile, the US Federal Reserve is trying to address the insolvency of the nation's banks, possibly including itself, by buying debt and adding the offset liquidity to the banking system.

Since this cannot work in the long term, because at some point foreign bond holders who have shown much forbearance for the profligate spending of the US might begin to avoid even the short term Treasury markets.

If such an event were to occur, I think the only possible solution would be for the Federal reserve to directly monetize debt, thereby rewarding debtors and punishing some but not all creditors.

Because some creditors would begin moving capital out of the US Treasury markets into equity/commodity/real estate markets both in the US and elsewhere in response to the inflationary fix to the insolvency issue.

If this were to happen - then we might be in territory not yet experienced by the US economy because in 1929 - the US government saw deflation as the least of the evils. This time, in 2012 it appears to Bernanke that inflation is the least evil.

The results of this policy should be novel, if not exactly predictable.

And so ends one of my few opinion pieces hoping that it has not "removed all doubt" concerning my stupidity in matters economic...