2012.12.14 Monthly Amex Oil Index Cycle Chart

Here is the Amex Oil Index model. This model is the only one that remains unchanged from July, 2012.  It did not have any interest rate or unemployment data inputs and there may be a lesson in this. KISS.

2012.12.14 Monthly Gold Cycle Chart

Here is the new gold cycle model chart. As with the silver model, all cycles < 233 days were excluded from the analysis, as well as any cycle information obtained from outside the data series.

2012.12.14 Monthly Silver Cycle Chart

This is the new cycle model for silver. It has been pruned so that all data inputs are directly related to the time series and nothing else. All cycles with periods less than 233 days were also eliminated from the analysis because short-term fluctuations were much less helpful in decreasing error than has been the case in the past.  I'll see if I can update it at least monthly. 

2012.12.14 Monthly DJIA Cycle Charts

I have been slowly rebuilding the cycle models, which are now less complex as a result of the input data pruning. As promised, here is the new cycle model for the DJIA.  One of the cycle model inputs, a cyclical model of its own relating the yield curve spread and rate of change of US monetary aggregates is worse than useless and was contributing to the increasing error. I have also dropped all inputs regarding employment data from the US BLS. The increasing second-degree fluctuation of their short-term variance convinced me that the set of data I was using contained more noise than information. The academic question is now not whether  Fed interventions can change business cycle amplitude and phase, but by how much and over what time window. Right now, it looks like the long-term cycles with a period > 8 years are stable since 1896, and it is the noise in the shorter cycles that created the error in the previous model version beginning around early 2010.   So according to the model, we might have topped out on the DJIA.

2012.06.15 Weekly DJIA $ Gold $ Silver $ Oil

The cycle models suggest downward pressure on prices for the DJIA, Gold and Oil, while the Silver cycle model hints at higher prices for silver over the next 4 weeks peaking at about the $30/oz range. Have a great weekend!


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2012.05.01 Long Term DJIA $ Gold $ Silver $ Oil

These cyclic structural models are not designed to be used as trading models. These models perform with less error on the time scale compared to the price scale, and are best interpreted by putting more credence in the turning points rather than actual prices. With that in mind, here is the long term DJIA model, which has been performing poorly as a short term indicator of market movements. When backtested at decadal time scales, the DJIA model still has some validity, so I am showing the chart which must, by necessity,  include the shorter time scale parameters. There is always the possibility of a "6-sigma event" in terms of short-term model divergence, which will become apparent with time if true. The event itself may reflect the concerted effort of Western Central Banks to push forward the "Minsky Moment" by recursively capitalizing banks that have lost assets. Or, it could just be a lousy model.

Both gold and silver models are performing well in the short term, so it is interesting to look at the long term picture. I extended the time range to 2024 to capture the parallel behavior of the gold and DJIA models. To engage in a bit of fantasy - it makes a nice story that somewhere around 2016, instead of being issued as debt, large quantities of money are added to the world economy by concerted monetization of government  held bonds. I could see the rise in gold and DJIA as a reflection of a Von Mises "crack-up boom." Thorsten Polleit has a nice essay on the subject.

I don't have any reasonable ideas regarding the divergence of gold and silver, however, these are just models so reality may intervene!

Previous long term predictions:   2012.03.30 Monthly Long Term Predictions: DJIA $ Gold $ Silver


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2012.04.20 Weekly DJIA $ Gold $ Silver $ Oil

I developed the very short time frame child cycle models to deal with short term anomalies in the time series due to the likely consequences of  daily robot manged trades. I think that the DJIA very short term time frame model had the most benefit - since the last few months have been characterized by non-linear parameters in the DJIA time series that are highly deviant from the usual "degree of randomness" or "predictability."

All three Gold, Silver and Amex Oil cycle models are performing well. Silver may experience a bounce to over $33 in the next week or two before downward price pressure resumes.  If you are under clear skies - enjoy the Lyrid meteor shower over the weekend!



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2012.04.13 Amex Oil Index

The AMEX oil index (XOI.X) has been formally backtested so I have removed the "experimental" tag. It appears that while the time series for this cycle model is relatively short. there was enough cycle information so that it retains reasonable predictive value. The link for the prevous chart:  Econocasts business cycle chronicles: 2012.04.04 Experimental Amex Oil Index.


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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!

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2012.03.09 Weekly DJIA $ Gold $ Silver Predictions

Very short time frame charts

The structural models for gold and silver seem to be working out well - but the DJIA structural model is still, to put it kindly, in flux.  A non-technical explanation is that while these models are adaptive up to a point - that is they can  modify their parameters with new data - the DJIA model is treating the 45 degree angle spike off the predictive curve as short term volatility because of the non-linear signature of the time series at that point.  You don't need fancy math to see that the texture of the time series at the point where the actual DJIA curve jumps off the predicted curve is very different from the rest of the curve - and this is occurring at different time scales.  Which does not mean the model is correct, it is just an interesting development.

I hope everyone has a good weekend - and if you are close to the poles, enjoy the nice Aurora Borealis/Australis!

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2012.03.02 Weekly DJIA $ Gold $ Silver Predictions

Ultrashort charts

The precious metals seem to be within predicted ranges.  With respect to the DJIA, the structural model  is doing its own thing, whatever that might be.  It's funny to have a better handle on short term moves of gold and silver as opposed to the  DJIA.

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2012.02.29 Monthly Long Term Predictions: DJIA $ Gold $ Silver

Happy Leap Day!  Gold  and silver have come back to the predicted curves today - the metal models were run with the London AM Fix for Wednesday, February 29, 2012. The DJIA model is still converging, but does not reflect reality.  I'm going to see what happens to it in the next month - though that's what I said last month!

The file used to generate the DJIA chart can be found here It covers the DJIA from 1900.01.02 to Leap Day..Please check my post below for additional details.

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2012.02.24 Weekly DJIA $ Gold $ Silver Predictions

At this rate, this project will turn into an academic exercise to see when the models refuse to converge. The DJIA has now broken all Z-score records since 1896!

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