Monday, August 12, 2013

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  .