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


Permabear Doomster said...

So... you're calling a multi-year top... from the recent high of 18351 ?

Hmm... what about the central banks? You know they'll spin up the printers on any major equity drop.

Anyway.. have a good weekend. Next few months will be busy... we need the rest.

*installing disque is recommended... if you want to have more of your readers contact you.

Paolo said...

It's a pretty soft call! Given the previous experience with equity cycle models the issue is exactly what you mention - the possibility of QE(n+1). There is no historical precedent for the magnitude of the current and long-lived "Fed put" and how it alters the business cycle. Historically, we are due for a correction, whether the central bank can keep holding off decadal and secular cycles will be played out in the remaining months of this year.

A Jones said...

The only question worth asking is the timing of the inevitable end. Most indicators seem to suggest Oct 15. We shall see.

rotrot said...

indicators on the DJIA monthly chart (particularly the stochastic above price) are consistent with the DJIA cycle model chart...the top is in...thanks for sharing your interesting and informative work!

A Jones said...

Indeed. I still think it would take a very brave man to start shorting in any major way.

Anonymous said...

Hi Paolo,

The DJIA model is looking good and seems to be aligning with projections from other methodologies, so hopefully it'll find its "groove" like your XOI model. I guess that the one major issue is whether we'll see one more concerted effort towards new ATHs (either DJIA or S&P/NDX) or if this is the beginning of significant correction. (I'm staying on the sidelines between correction and bear market.)

Yet more interesting times ahead,

Mr. Anon