Saturday, January 25, 2014

2014.01.24 VIX Cycle Model Chart

2014.01.24 VIX Cycle Model

The VIX cycle model once again suggests that higher VIX prices are to be expected over the next year. However, astute readers will notice that as shown above, the turning points are better predicted than the magnitude of the change at those points. Right now, according to the model, the VIX is "ahead of itself" and a very short term correction, as happened after previous positive and negative spikes, is very likely.  The previous model output is shown below.

2013.12.13 VIX Cycle Model

2014.01.24 DJIA Weekly close cycle model chart

DJIA Weekly Close Cycle Model 2014.01.24

As promised, and somewhat late, I constructed a new cycle model for the DJIA based on weekly close data, which eliminates daily fluctuations from the analysis. My reward for the work was a model that has a better overall fit, but it has all of the problems of the previous daily close cycle model - namely that it predicts, based on past seasonal and decadal cycles, a convergence of these cycles to the downside in the 2014 - 2015 timeframe but the current divergence between predicted and actual prices remains.  Taken together, I would interpret the model with liberal amounts of skepticism, doubt and possibly some salt.  For your viewing pleasure, here is the last iteration of the daily close cycle model for the DJIA.

DJIA Daily Close Cycle Model 2013.11.27