2013.08.30 DJIA Cycle Chart

Historical price cycles for the DJIA have converged so that there is an unusual steep decline predicted to last until early 2014, with a target price level of 7700 +/-. The major caveat is that the Fed may continue its unprecedented policy of constructing a mirage of liquidity in the desert of insolvency. Hence, the best way to interpret this chart is that there are extremely strong historical factors pointing to a large drop in the DJIA. Whether or not it comes to pass in this time frame depends on whether the historical cycles resume on time, or whether the Fed can continue to put off the day of reckoning, with a historically low ratio of assets backing the liquidity which it has, supposedly, temporarily created via its bond buys.

2013.08.16 Silver Cycle Chart

Here is the silver cycle update which includes the infamous z-score, measuring how far the prediction deviated from the actual price. The lines above and below the "0" on the right represent the variance from the mean in SD units from -5 to 5. The ovals show the last time since 2010 silver prices exhibited such anomalous behavior with respect to the model prediction, with a z-score < -4. This was very quickly followed by a reversion to the mean. Inasmuch as the silver cycle model has otherwise been relatively accurate, the message from a cyclical model point of view is that the current rise in silver prices will not be sustained.  On a completely different note, I hope some readers had a chance to catch the latest heavenly performance art in the form of the Perseid meteor shower last weekend.

2013.08.12 DJIA Cycle Chart

The DJIA price time series prediction shows very strong cyclical pressure to the downside. Nevertheless, the divergence of the actual price to the predicted price is now at a historically high level going back to 1896. Since the current rate of QE(n+1) is $85 billion a month, which is without historical parallel, this price prediction may not stand the test of a few months. One conjecture I have is that were QE to end tomorrow, I suspect the price prediction would be much more accurate.  I have tried to incorporate Fed POMO operations in the model, and they are worthless for the cyclical model I am using here in terms of increasing accuracy.

Added on 2013.08.14

From zerohedge

So perhaps in the very short run, 2009 - 2013, POMO has indeed altered the length of the business cycles  .

2013.08.07 Silver Cycle Chart

According to this model, silver prices should stabilize in the 1500 range until the end of the year, followed by a local maximum in the Spring, 2014, before resuming their downward course towards 1000 +/-.