Saturday, March 26, 2016

2016.03.26 DJIA Cycle Model Chart

2016.03.24 DJIA Cycle Model Chart

The DJIA cycle model is now at an extreme divergence between actual and predicted level for the index. Note that in comparison with a run of the same model on 2015.12.31 shown below and here on the blog, a phase change has occurred, in the opposite direction I expected. The current run of the model suggests an even steeper slope down for the rest of the year, whereas the December run suggested a flat period for index prices between march and September.  Also note that I had to adjust the Z-score scale as the divergence is heading towards -2.5. This is the largest divergence since Spring, 1981; August 1946; Spring 1943; Spring, 1930; October, 1929.  The lowest Z-score for the model was -3.53 in September, 1929.  Remembering that all models are wrong but some are useful, my current interpretation is that there are extremely powerful convergent  downward cycles at play here, from yearly to decadal,  but the caveat is that central bank liquidity and forex management do not enter into the model whatsoever.

2015.12.31 DJIA Cycle Model Chart


Diego said...

Hello Paolo, thank you for the update.
My emotions (fear, because I'm horribly short and in pain) are at the oposite of my technical analysis (very bearish on the stock indices). 'Hope' is not a trading strategy but I hope the top is near ;)
Many thanks and regards, Diego.

Paolo said...

I second the (e)motion!

ZZ Q said...

how do you expect DOW to be down and oil goes up? make no sense

saraylı said...

Thank you for publishing the results of your model for the DJI ..