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Major Correction? Predicting DJIA 6 weeks from Wednesday 1/06/2010 to 2/19/2010

Fig. SMP_012510 is in Album SMP_2010 to …

 

Updated: 01/25/2010:  (Fig. SMP_012510)                                    Case 2:

Max:   TDN 449 = 1/26/10     Predicted DJIA Close: 10,278            Max:   TDN 464 = 2/16/10     Predicted DJIA Close: 10,321
Min:    TDN 467 = 2/19/10     Predicted DJIA Close:   9,930           Min:    TDN 467 = 2/19/10     Predicted DJIA Close: 10,208
Note Major Correction forewarned on TDN 443/5 = 1/15/10 to 1/20/10
     (Fig. SMP_012510: (a) Red Circle on SMP_012510: y k+1+z k+1 crossing Collapsed Shadow 231:1 day
                                 (b) First Alert: y k+1+z k+1 peaking wrt max DJIA - dashed yellow line – on TDN 405 = 11/19/09)
 
Compare Warning in:
Fig. nyt_jch_012510 (in Album SMP_2010 to …)
New York Times
January 25, 2010
Volatility and Politics Are Feeding Fears of a Market Correction
by Javier C. Hernandez
Read First Blog, "New Invention: 20-Month Dow Jones Industrial Average Prediction (to March 2010)"

see Blog July 11, 2008 (TDN 50) http://stockmarketpredictor.spaces.live.com/default.aspx?_c01_BlogPart=blogentry&_c=BlogPart&handle=cns!4A3D82A027CE1716!175

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Predicting DJIA 6 weeks from Wednesday 1/06/2010 to 2/18/2010

Fig. SMP_010610, SMP_010610_1 are in Album SMP_2010 to …

 

 

TDN 436 = 1/06/10    Predicted DJIA Close: 10,656
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Dubai Tsunami: (1) Assessing SMP’s Predictive Accuracy; (2) Re-capping SMP’s Concept

Fig. SMP_1006 (2), SMP_1006 (3) are in Album SMP_1001 to …

 

 

TDN 410 = 11/27/09     (Fig. SMP_1006 (2), SMP_1006 (3))
 
Accuracy of the SMP Model:
 
Compare 1st Blog July 11, 2008 (TDN 61) 3rd prediction: "A New High 14,683 for end of November 2009" with Figs. SMP_1006 (2) & SMP_1006 (3), in the period TDN 407 (November 23) & TDN 410 (November 27,2009), noting particularly the location of fm, Volatile Market-Sentiment component of DJIA in SMP_1006 (3), and the Intrinsic Value Yardstick and the Reflexivity in SMP_1006 (2).
 

Re-capping the SMP Model’s concept:

(1) the price of a stock has 2 components, (a) stable historical fh component and (b) volatile market-sentiment fm component;  fh being largely dependent on events that have occurred can be reliably determined while fm , though uncertain since it deals with the future, can nevertheless be rationally projected and continually monitored for deviation from forecast (see Blog July 27,2009: Retrospective NBER Definition of Recessions SHOULD BE REPLACED by SMP’s fm:  the volatile market-sentiment component of the market price, and Blog September 20, 2009: Is Bernanke 5 Months Too Late?  Introducing RIM, a New Approach to Identifying Recession).

(2) the intrinsic value of a stock can be determined by visualizing the stock price as plotted on the longitudinal section of a Cantonese "thousand-layer" ricecake "qian ceng gao" (where the cake surface represents the future stock price projected from its price history, and the actual stock price at any point in time – visualized as located at a particular layer in the section that corresponds to that point – is determined by the rank-value of that layer within the multi-layer thickness): regardless of the variation in thickness of the cake (and of individual layers) along its length, there is no change in the stock’s intrinsic value as long as the stock price stays at the same layerNote similarity of rank-value to "percentile" ranking.

Intrinsic value is masked when goods and services become monetized.  Financial crises result when valuation by "efficient" market theory runs amok and grotesquely distorts intrinsic value.  Since barter trade is intrinsic value at its most primitive manifestation, its recent re-emergence  should not come as a surprise New Buying Power, Despite the Economy, Paddock, Richard C., New York Times, November 29, 2009 )

The above concept offers a method to reconcile market value with intrinsic value at times of extreme economic stress. 

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Predicting DJIA 1 1/2 months (10/02/09 to 11/12/09) Using Intrinsic Value Generator

Latest Album SMP_1001 to (containing SMP_1001, SMP_1001 (3), SMP_1005, SMP_1005 (2), SMP_1006, SMP_1006 (2), SMP_1006 (3), SMP_1007, SMP_1009, SMP_1012, SMP_1013, SMP_1014, SMP_1015, SMP_1016, SMP_1019, SMP_1103, SMP_1104, SMP_1105, SMP_1109, SMP_1109a, SMP_1110, SMP_1111, SMP_1112, SMP_1113)

 

Predicting DJIA (blue line) from TDN 371 = 10/02/09 to TDN 400 = 11/12/09 using Intrinsic Value Yardstick with Reflexivity Generator

 

DJIA predicted to have broken through 10,000 by Friday, Oct 16, 2009 (Fig. SMP_1013)

 

TDN 409 = 11/25/09     DJIA CLOSE:  10,464.40

TDN 407 = 11/23/09     DJIA CLOSE:  10,450.95

TDN 400 = 11/12/09     DJIA CLOSE:  10,197.47

TDN 401 = 11/13/09     (Fig. SMP_1113)
 
Predicted DJIA normal change at CLOSE:     -3 (-15); intraday:  +40 to -56  ( at Close: HOLD SHORT )
Updated:  3:05 pm                    CLOSE:  +88 (+40); intraday:  +88 to -8   ( at Close: HOLD SHORT )

Actual DJIA change                at CLOSE:  +73;         intraday:  +108 to -5  ( at Close: HOLD SHORT )
 
 

TDN 399 = 11/11/09     DJIA CLOSE:  10,291.26

 

TDN 400 = 11/12/09     (Fig. SMP_1112)
 
Predicted DJIA normal change at CLOSE:  +32 (-88); intraday:  +279 to -87  ( HOLD after last SELL )
 

 

TDN 398 = 11/10/09     DJIA CLOSE:  10,246.97

 

TDN 399 = 11/11/09     (Fig. SMP_1111)
 
Predicted DJIA normal change at CLOSE:  +42 (-74);     intraday:  +292 to -73  (  HOLD  )
 

 

TDN 397 = 11/09/09     DJIA CLOSE:  10,226.94 

 

TDN 398 = 11/10/09     (Fig. SMP_1110)
 
Predicted DJIA normal change at CLOSE:  +21 (-33);     intraday:  +303 to -63  (  SELL  )
 

 

TDN 396 = 11/06/09     DJIA CLOSE:  10,023.42 

 

TDN 397 = 11/09/09     (Fig. SMP_1109, Fig. SMP_1109a)
 
Predicted DJIA normal change at CLOSE:  +27 (-2);     intraday:  +41 to -113  (  HOLD  )
 
 

TDN 394 = 11/04/09     DJIA CLOSE:  9,802.14

 

TDN 395 = 11/05/09     (Fig. SMP_1105)
 
Predicted DJIA normal change at CLOSE:  +33 (-47);     intraday:  -12 to -151  (  BUY  )
 
 

TDN 393 = 11/03/09     DJIA CLOSE:  9,771.91

 

TDN 394 = 11/04/09     (Fig. SMP_1104)
 
Predicted DJIA normal change at CLOSE:  +14 (-37);     intraday:  +34 to -63  (  SELL  )
 
 

TDN 392 = 11/02/09     DJIA CLOSE:  9,789.44

 

TDN 393 = 11/03/09     (Fig. SMP_1103)
 
Predicted DJIA normal change at CLOSE:  +15 (-46);     intraday:  -10 to -102  (  BUY  )
 
 

TDN 381 = 10/16/09     DJIA CLOSE:  9,995.91

 

TDN 382 = 10/19/09     (Fig. SMP_1019)
 
Predicted DJIA normal change at CLOSE:  +15 (-39);     intraday:  +26 to -105  (  SELL  )
 
 

TDN 380 = 10/15/09     DJIA CLOSE:  10,062.94

 

TDN 381 = 10/16/09     (Fig. SMP_1016)
 
Predicted DJIA normal change at CLOSE:  +21 (-26);     intraday:  +203 to -31
 
 

TDN 379 = 10/14/09     DJIA CLOSE:  10,015.86

 
TDN 380 = 10/15/09     (Fig. SMP_1015)
 
Predicted DJIA normal change at CLOSE:  +26 (-25);     intraday:  +178 to -11
 
 

TDN 378 = 10/13/09     DJIA CLOSE:  9,871.06

 
TDN 379 = 10/14/09     (Fig. SMP_1014)
 
Predicted DJIA change at CLOSE:  +28 (-18);     intraday:  +146 to -11
 
 

TDN 377 = 10/12/09     DJIA CLOSE:  9,885.80

 
TDN 378 = 10/13/09     (Fig. SMP_1013)   (gliches rectified as from today to improve predicted CLOSE and Intraday Range;   δm(a1) first defined at MA 200)
 
Predicted DJIA change at CLOSE:  +23 (+47);     intraday:  +156 to -24
 
  

TDN 376 = 10/09/09     DJIA CLOSE:  9,864.94

 
TDN 377 = 10/12/09     (Fig. SMP_1012)
 
Predicted DJIA change at CLOSE:  -43 (-83);     intraday:  +112 to -105
 
  

TDN 375 = 10/08/09     DJIA CLOSE:  9,786.87

 
TDN 376 = 10/09/09     (Fig. SMP_1009)
 
Predicted DJIA change at CLOSE:  +5 (+11);     intraday:  +119 to -73
 
 
 

TDN 373 = 10/06/09     DJIA CLOSE:  9,731.25

 
TDN 374 = 10/07/09     (Fig. SMP_1007)
 
Predicted DJIA change at CLOSE:  -81;     intraday:  +14 to -184
 
 
 
TDN 372 = 10/05/09     DJIA CLOSE:  9,599.75
 
TDN 373 = 10/06/09     (Fig. SMP_1006, Fig. SMP_1006 (2), Fig. SMP_1006 (3))  Note: fm (volatile market component of DJIA) ABNORMAL BREAKOUT!!! (see Fig. SMP_1006 (3)
 
Predicted DJIA change at CLOSE:  -7;     intraday:  +21 to -144
 
 
TDN 371 = 10/02/09     DJIA CLOSE:  9,487.67
 
TDN 372 = 10/05/09     (Fig. SMP_1005, Fig. SMP_1005 (2))
 
Predicted DJIA change at CLOSE:  -1;     intraday:  +26 to -123
 
 
 

 

 

TDN 371 = 10/02/09     DJIA CLOSE:  9,487.67
 
TDN 372 = 10/05/09     (Fig. SMP_1005, Fig. SMP_1005 (2))
 
Predicted DJIA change at CLOSE:  -1;     intraday:  +26 to -123
 
 
TDN 370 = 10/01/09     DJIA CLOSE:  9,509.28
 
TDN 371 = 10/02/09
 
Predicted DJIA change at CLOSE:  -68;     intraday:  +24 to +3
 
(Updated 1.02 pm Fig. SMP_1001 (3))

Predicted DJIA change at CLOSE: +14;     intraday:  +24 to +3

 
Actual DJIA change     at CLOSE: -21.61;  intraday:  +15.50 to -79.20
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Is Bernanke 5 Months Too Late? Introducing RIM, a New Approach to Identifying Recession. Monitoring DJIA for 6 months (9/18/09 to 2/26/10) Using fm (Volatile Component of Market Price)

Added Album SMP_0920 (containing Fig. SMP_0920_1/2/3/4/5, nyt_0725 (2) (copy), SMP_fn_1 (copy), SMP_fn_2 (copy))

 
TDN 361 = 09/18/09
 
Fig. SMP_0920_5, using a New Approach to Identifying Recession (RIM), enables the market to be monitored for the next 6 months for deterioration from its current condition (just emerged from recession).  Follow the track of fm (the volatile market component of DJIA) relative to the Recession Identification Zone (as explained in RIM below); there should be plenty of warning if the market decides to do a double-dip, say on 12/18/09 (TDN 425) & 2/18/10 (TDN 468) [red-circled].
 
Beware of fm peaking on 9/24/09 (TDN 365) & 11/13/09 (TDN 401) [red-circled].  Since high fm usually pairs with low fh and vice versa, and δDJIA (change in DJIA) = (fm + fh)* a previous price Pk-a,(see legend in Fig. SMP_fn_1 (copy)), fm failing to peak on those dates will be reflected as big drops in DJIA. 

 

New Approach to Identifying Recession (RIM)

 

To effectively prepare for and deal with a severe recession, a crisis measurement yardstick is required.  Ideally, it should forewarn of the recession’s approach, identify its onset, gauge its severity during the crisis and update forecasts of its duration, signal light at tunnel’s end, and definitively benchmark emergence from recession.

 

Current recession forecast and definition by National Bureau of Economic Research (NBER) protocol is compared with the Recession Identification Method (RIM) derived from the SMP Model, as outlined in the appended SMP_0920 Album (Figures SMP_0920_1/2/3; Recession End on Sep 15, 2009 is enlarged in SMP_0920_4 ).

 

The SMP Model postulates that the change in a stock’s price comprises 2 components (Blog 7/27/09, legend in Fig. SMP_fn_1): fm (volatile market component) and fh (stable historical component).  RIM consists of charting fm across a Recession Identification Zone defined by an upper and a lower boundary each formulated as a fraction of a hypothetical 20-month future price forecast of the stock’s price.  Thus, in Fig.SMP_0920_1, Recession Upper Boundary = +0.165 * shadow Pk-a, Recession Lower Boundary = -0.088 * shadow Pk-a.  These factors were derived from NBER’s definitions of the Recession End on Sep 15, 2009 and Recession Start in Dec, 2007.  Start and End of the current
Recession are circled: Red Circles for definitions by NBER and Blue Circles for definitions by SMP Model.
 
The above RIM upper/lower boundaries correspond to the respective NBER boundaries in Fig. nyt_fn_0725 (2)-copy (where lower boundary = 0 % per month growth, upper boundary = 12 % per month growth); fm below the Recession Lower Boundary confirms entry into recession while fm above the Recession Upper Boundary confirms emergence from recession.  Transition of fm through the Recession Identification Zone – from upper to lower, or vice versa – gives months of advance warning of entry into or emergence from recession proper; thus (a) in Fig. SMP_0920_3 – Blue Circle (TDN -128) to Red Circle (TDN -72) – one day after DJIA reaching all-time high 14,164, fm warned of forthcoming recession 3 months ahead of time, and (b) in Fig. SMP_0920_2 – Blue Circle (TDN 265) to Red Circle (TDN 358) – fm forecasted emergence from recession nearly 5 months before FED Chairman’s conjecture of recession end.
 
Compared to the above RIM tracking of recession, NBER was nearly a year late (Nov. 28, 2008) identifying December 2007 as the start of the current recession cycle.  One expert suggested NBER “would eventually conclude that the [21/22-month long] recession bottomed out in August or September of this year”.  Associated Press on Sep 15, 2009 quoted Bernanke saying "From a technical perspective, the recession is very likely over at this point”.
 

Thus, NBER relies on an empirical and rear-view-mirror method to define recession.  By contrast, RIM’s definition is derived from the SMP Model which is formulated from concepts logically framed and verifiable by falsification.

 

For example, prior to his announcement on Sep 15, 2009, if Chairman Bernanke had used the RIM method to track the recession, he could have brought the world out of recession 5 months earlier, from TDN 265 = 5/04/09, by highlighting improving financial conditions evidenced by fm tracking upward, from the Recession Lower Boundary, out of the Recession Identifying Zone (Fig. SMP_0920_2).  Mr Benanke had a 10-day advance notice of the final stage of DJIA coming out of recession (see Fig. SMP_0920_4, from TDN 348 to 358), the last 5 days (TDN 351 = 9/08/09) with fm confirming this outcome by staying at the Recession Upper Boundary.

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Predicting DJIA 8/14/09: Start of Interim Pull-back

Added Album SMP_0813: Fig. SMP Market Predictor (1), SMP Market Predictor (2), SMP_ProofOfHypothesis (copy)
 
TDN 337 = 08/14/09
 
DJIA last updated on TDN 321 = 07/29/09, to test forward market predictability using Intrinsic Value and Reflexivity Generators.
This prediction is reinforced by fm (volatile market component of market price) & fh (stable historical component of market price) in Fig SMP_ProofOfHypothesis [last updated TDN 283 =5/29/09 ] posted in last blog July 27, 2009.
 
Note these predictors also forecast an interim DJIA top at 10,856 for TDN 407 = 11/23/09 [Fig. SMP Market Predictor (1)]. This updates the 3rd prediction made in my first blog "New Invention … " posted July 11, 2008 using PMC_0: Price-History Baseline initialized to MSL = 0 on TDN 30 = 5/28/08 (which has been maintained unaltered since TDN 50 = 6/25/08).  The PMC_0 Price-History Baseline is the precursor of the current Intrinsic Value and Reflexivity Generators.
 
Tomorrow TDN 337 = 08/14/09 marks beginning of two-week interim market pull-back.
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