Archive for the ‘Time Triads’ category

Dow Time Oscillator (updated)

Do you see the non confirmation between time oscillator and price? The non confirmation between the oscillator and price clearly suggests negativity going ahead for DOW. This is a case for an impending reversal. The oscillator structure also looks weak and ready to resolve lower.

This is what we said on 2 Jan 2010 for DOW Jones Industrial Average.

“Any January positivity should be an illusion. The first quarter of 2010 should be negative for DOW.”

Prices are up 0.96% from Jan high (10,729) to March lows (10,832). On one side we were wrong as prices did not reverse, but less than 1% upside is enough choppy action to prove that the best of TIME strength is over for DOW in the ongoing CYCLE.

March 2009 we started illustrating time oscillators with nesting momentum triads. We have been refining it since then. The current form of time oscillator combines three time frames. The oscillator moves like a cycle and should atleast push lower back till zero levels before anything. Time oscillator takes into account three time periods viz. minor (14 days), Intermediate (70 days) and primary (210 days). Here we have illustrated the time oscillator for NIFTY (India 50). The oscillator has clearly topped and should break down below key neckline supports soon. This keeps us looking at a topping price absolute price performance.

Published 2 Jan, 2010

Time Oscillator is a range bound indicator suggesting increase and decrease in time periods. Starting 30 Nov 1988, DOW witnessed a confirming increase in time periods till 30 Sep 1998. From 1998 time oscillator fell till 31 July 2001 along with the prices. Since 30 Apr 2008 the oscillator is falling till date. It is too early to assume that the rise in DOW is a new bull market and 2010 will be a positive year. Till the oscillator sees a further fall till 60-100 levels, the current rise on DOW remains a bear market rally that should correct into 2010.

Primary (multi month) perspective

Intermediate (multi week) perspective

Considering the primary (multi month) time is still pointing lower (above), the intermediate time oscillator at 250 days suggests an intermediate top might be near or already in. Only once since 2002 has the time oscillator breached 300 days.

Minor (multi day) perspective

On the minor time oscillator, the 2009 cycle seems over and prices should get ready to trend. Seeing the minor trend in light of intermediate and primary perspective, any January positivity should be an illusion. The first quarter of 2010 should be negative for DOW.

CYCLES covers global currency pair, global equity, emerging equity, and inter asset cycles. The product studies time cycle, asset outperformance and underperformance signals. The aim is to look at markets as a group and in isolation. This is a monthly perspective product that readers should use in conjunction with our other features like WAVES.GLOBAL , WAVES.INDIA, WAVES.FOREX, WAVES.METALS, WAVES.ENERGY, and other global features. Our economic and psychological world is well connected and cyclical. INTERMARKET CYCLES is a subject coined by us at Orpheus. The subject studies the asset linkages and the fixed periodicity between them. We look at the subject from three aspects. First from the sectoral aspect. As we redefine Equity sector rotation and reclassify global sectors into three broader sectors viz. Early Economic, Mid Economic and Late economic. We juxtapose these three broad sectors on the economic and business cycles. Second we look at subject from the 25-30 year Asset cycles. For example the 30 year Gold cycle and commodity cycle, which is inverse of the 30 year equity cycle or social prosperity cycle. Third we look at inter asset cycles between Gold and Oil, VIX and S&P, Technology and Blue Chips, Local Currency and numerous other asset pairs to look for asset outperformance and underperformance signals.


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Demystifying Elliott Waves

Elliott waves can be recreated using the geometrical Time Triads.

It’s a rare chance that you have not heard about the Elliott Wave Theory. Named after Ralph N Elliott, the theory redefined Charles Dow’s theory of 1880′s where Dow talked about three legged bull market, and compared markets with ripples, waves and tides. Born on 28 July, 1871 Elliott was a genius just like 6 Nov, 1851 born Charles Henry Dow. They both had the ability to identify market patterns and hypothized a theory that stands firm till date. The Elliott forecast of a multi decade bull market made in 1935 at the bottom of the great depression can easily pass as the best financial forecast of all times. The work was generational in nature and was carried ahead by a string of elite practitioners Charles J Collins, A J Frost, Hamilton Bolton, Richard Russell and the famous Robert Prechter whose priceless contribution was instrumental in getting Elliott the much deserved attention.

Figure 1.

Elliott wave hypothized that markets move in a 5-3 structure (Figure 1.), which created trends and counter trends. This structure happened at all time frames from the smallest tick data till century old data structure. Phelps Brown and Sheila V. Hopkins, (Oxford) estimated 1000 years of price history also has 5 wave structure. There are a total of 13 patterns which summarize all the price action and all technical analysis. Elliotticians have occasionally mentioned that technical analysis is a foot note in Elliott. If you read the historical work of Bolton, the accuracy is unprecedented. Prechter has written extensively illustrating how Elliott subsumes all conventional price patterns. Prechter claims it to be a science.

However despite the generational success and body of knowledge, there are heaps of criticisms against Elliott. First: Prove the science and mathematics (David R Aronson). Second: Standalone Elliott is fatal (Constance Brown). Third: Patterns are illusionary. Humans see what they want to see (Hersh Shefrin). Fourth: Markets are patterned but cannot be used to predict (Benoit Mandelbrot). Fifth: Price action is random (Nassim Taleb). Sixth: Markets are efficient (Eugene Fama). Seventh: Human beings like stories (Robert Shiller). There are many other issues concerning the practice of the technique. It’s a visual skill, which needs to be nurtured. There are not always perfect counts. Forecasting Time using Elliott is weak. A student has to go back in price history, which is always not easy, especially owing to the fact that society got used to high tech gadgets, computing power and Elliott wave counting softwares. We got used to fast solutions.

The criticism is not about just Elliott, it’s about everything technical. Head and shoulder pattern has come under much criticism from behaviorologists, statisticians and fundamentalists. Aronson goes ahead and carries a complete case called ‘head and shoulder’, objectification example. He systematically proves it bust. Aronson has been comprehensively harsh with Elliotticians and calls it a power of good story. This is what he says “The story gives Elliott analyst the same freedom and flexibility that allowed pre Copernican astronomers to explain all observed planetary movements even though their underlying theory of an earth centered universe was wrong”. First and foremost, Aronson’s labeling Prechter as a great story teller is highly critical. As Prechter has demonstrated enough accuracy over years and contributed to serious literature on markets and psychology. Second just because Elliotticians could not scientifically prove the mathematics does not make the Elliott wave a grand story, as we will explain ahead.

Figure 2.

Understanding the science in a theory takes time. Elliott did not use Fibonacci mathematics when he first hypothized the theory. At a suggestion he picked up books on Fibonacci and found it very compatible. In figure 2., you can see that Elliott can be counted mathematically in terms of exact numbers. The first subdivision is a cycle, one trend up and one trend down, which corresponds to Fibonacci numbers 1 and 1. The second subdivision when the uptrend divided into five waves and the down trend divides into three waves again correspond to Fibonacci numbers 5 and 3. As we go on subdividing we keep hitting numbers from Fibonacci sequence not only if we consider up trend and down trend separately, but even if we aggregate them.

How did Elliott miss it in 1934? Why is Elliott so countable? Does counting not make it mathematical? And why has nobody ever asked why Fibonacci and Elliott are so linked? What is the connection? Both change in prices, and Fibonacci numbers labeling the wave are exponential functions (Figure 3.). The magic of Elliott and Fibonacci lies in their exponential nature. There is such an extensive overlap of research historically that though Euler’s number ‘e’ (2.71828)) dates back to 1727, we have studied it in different forms, we never attempted to unify the forms. Starting from the marginal utility function, Pareto curve, Poisson distribution, fractals, are all linked with the exponential function just like Elliott.

Figure 3.

Though Prechter mentioned that nothing much has been constructively added to Elliott since its creation, Tony Plummer’s seminal book was the first to demystify Elliott. The book first published in 1989 showcased a stylized pattern of time and suggested that time should nest and be fractalled. Plummer also went ahead and said that Elliott’s five wave structure was not the law of nature but the three wave structure of cycle was the real law of nature. This was a large thought, which we at Orpheus extended ahead into Time Triads, a hierarchy of triangles subdividing and multiplying by 3. Last feature we recreated the omnipresent head and shoulder formation (Plummer’s stylized pattern of time) by using Time Triads. Head and shoulder lost its mysticism as it could be created by a set of Euclidean triangles. The pattern was mathematical and fractalled. We created the pattern by assigning Cartesian coordinates to the units of Time Triads.

This is not the first time triangles have been used to create mathematical structures. Spidron is a field of triangles crumpled and twisted into a wavy crystalline seahorse’s tail. Then there are Koch Snowflakes which are created from inverted triangle or a V shaped structure. We have Pascal triangles. The oldest Pythagorean Theorem came from triangles.

Can time triads create Elliott wave structures and lay all the illusion of market patterns finally to rest and make market fractals a complete and validated science? This has been a quest for us since we coined the term Time Triads, Time Fractals 12 months back. Time Triads grow and decay exponentially with a factor of 3. We took two head and shoulder patterns created using Cartesian coordinates and did the same additive technique. We obtained a nine legged structure (Figure 4.) impulsing up and a nine legged structure moving lower. Elliott defines nine legs as an impulsive structure. Five wave structures are known to subdivide into nine waves.

Figure 4.

Elliott wave talks about a stage in market when a corrective can drop 90%. The illustration (Figure 4.) is a complete cycle of a bull and bear market moving up and coming down in 9 legs. Another classic illustration of an Elliott structure is illustrated in Fig 5. Here we have an impulse followed by a sideways correction. This structure also has 9 legs moving up, and 9 legs moving sideways. There is no magic about 18 legs (9+9). There are 9 triangles making a larger triangle. And 9 triangles have a total of 18 sides. The magic of Elliott disappears. Now one may say what about the 13 patterns? We have assumed an idealized form of Time where larger Time does not influence smaller Time that is no translation. A computerized model where we account for translation can generate all the 13 patterns of Elliott.

Figure 5.

There are no incomplete peaks in nature. What goes up invariably comes down, even if the uptrend is a century long. Growth and decay are parts of nature and markets. The reason Elliotticians could not prove the theory till now was owing to the fact that the big picture of time was missing. Time is bigger than generational knowledge. Time Triads just like Elliott can pinpoint where we are today and where we are headed tomorrow. There is no magic, it’s all geometry.

Trashing the AXIOMS (Archive)

First published on 19 Mar 2007

We humans are strange beings, we love to trash what we create, wealth or peace. It’s a harsh reality. Euphemistically we might call it a new age theory, or evolution. But the reality is that psychology is calling 200 year old economic thought as junk. And guess what, Douglas McGregor (1906-1964) and Abraham Maslow (1908-1970) might just be laughing about how they might finally turn out to be the real contributors to modern economics. Mc Gregor whose work was based on Maslow’s hierarchy of human needs coined the Theory ‘X and Y’ of management. The first psychologist ever to work at MIT, talked about management styles that assumed employees to be lazy, irresponsible and with little ambition on one side and with all the good traits on the other. The good ‘Theory Y’ assumes that we humans as employees want to do a good work and create. Latest research on behavioral finance concurs with ‘Theory Y’ and call humans as nice and not selfish. The studies have even proved that the economic belief that more money is better, is not true. We humans are not motivated by more money. After a point happiness disassociates from money.

But behavioral finance does not end its recourse here. It adds that apart from being nice, we are also dumb. Putting it simply a majority of us are “penny wise and pound foolish”. If majority of us are like this that means either we love to lose the valuable pounds or the economics we have been taught is all wrong. The latter seems more reasonable as behaviorologists have also pointed out that we humans are also loss averse. We can not be loss averse and still lose, so there is definitely something wrong in the way we have been taught.

Economic axioms are not universal truths, some of them are far away from truth, it’s just that nobody questions them. The big one is the interest rate axiom. The lower the interest, the better it is. This seems logical, but it does not work. Higher the better, is what stock markets around the world suggested starting 2004. A two year yield curve for Japan, US and India exhibited similar results. India witnessed a falling interest rate scenario from 2001 till 2004, as the yields dipped from near 8 down to 4.5. This was accompanied by a sideways Sensex till 2003 hovering near 3000. Then starting 2004 when the yields took off from 2004 back to 8, the benchmark quintupled. The Nikkei doubled and Dow moved up 63%. One might say, “This was an exceptional time for global prosperity, we all know that falling interest rates are positive for stocks”. Wrong. 1929 Depression happened in a falling interest rate scenario. The theory that rising interest kill stocks, or interest rate tool has predictive value, and central bankers are economic wizards is incorrect. Ex Federal Reserve, Chairman, Alan Greenspan admitted that the ability of people to think that central bankers can avert recessions is “Puzzling” for him. Inflation and Interest rates can be controlled be a central banker, but whether they will have the desired effect on the economy is doubtful. Globally, interest rates are seen to rise and fall together and there is an inflation cyclicality much beyond local tinkering.

Economic reasoning is not always unequivocal. Is rising currency good or bad for the market? Dollar-Dow correlation oscillates from positive to negative. Correlations are never permanent. Hence giving currency strength an axiom shape is inappropriate. We can extend the same argument to Oil. “Oil price rise is not good for the economy, but this time it’s different”. Good news and bad economic news is make believe and convenient. “The same news was good yesterday, but today it has got diluted by the x factor”

Another axiom is making the ‘Buy and Hold’ strategy almost synonymous with investing. Well, if it worked for Warren Buffet, it may not necessarily work for us. Buffet started working at his Father’s brokerage in early 1940′s. This was after the depression. Buffet bought when no body was looking at stocks, so he was more of a contrarian and timer than a buy-hold investor. Ofcourse he held on to what he bought for more than a few futures trading days. These days they say, “if you don’t sell fast enough, you might hold for a long time”. Diversification is thought to be another way to mitigate risk. It is good if one understands that assets are not just stocks. And that there is a difference between real estate and cash. Understanding the subprime mortgage mess might shed some light on this. And also the fact that if you really want to emulate Buffet, we need to have cash at the bottom, not eroded stocks, waking up to the harsh reality of earnings.

Markets can fall with or without earnings. As stock prices do not track earnings. 1920-29 was a period of rapid earning growth. Real S&P composite earnings tripled over that time and real stock prices increased almost sevenfold. 1950-59, S&P composite tripled again, but this time earnings grew only 16%, over the entire decade. There are many other bull market examples where one can not illustrate the earnings logic to justify multifold increase in stock prices. The argument can be extended to explain dividends and price changes. We ask for dividend at market bottoms and not at a market top. The relationship is inverted and the reasons are half baked. They only explain us why stocks go up, not why they come down. “The come down because of global risk and they go up because of real earnings”. Yeah right!

After all the hard work, what are we left with, a portfolio in a local currency. How competitive is the local currency anyway? How convertible? Are we in a country, which only sees currency strengthening. Or does our central banker appease us with a managed float or a target zone currency management jargon. If we become richer every year, as the local paper strengthens, then the local exports may flounder. The companies we buy on the stock market might be thrown out of business, just because we can afford a longer vacation in Europe. Richer in a quarter and poorer the next is all what currency plays are all about. Cross border mergers are a reality, we pay and convert from our pocket when we bid for companies around the world. Individually we may not have a currency risk, but the stock we buy is in the heat of things. We wish currency crisis stays next door, but it is happening, every day. Ask a currency trader, it was never trickier.

Hence, the real currency is not the local paper, but Gold, at least it’s traded internationally, is an alternate for money and plus it’s rising. And if we hit a crisis, euro becoming the same as dollar or dollar becoming half as much as euro, or yen strengthening back to 80, we are left with only a few risk management strategies. One of them is Gold. So how rich is our Sensex portfolio in terms of Gold? If the real money was Gold, then the Sensex portfolio is the same as it was in 2000. Real money has moved on and Sensex is still back at the seven year historical high. We are not as rich as we think we are.

Economics that we know can not help us survive, leave aside making money. Market is not a conventionl model. Bull markets have their own geniuses, sucessful corporations and stories, which disappear as the trend changes. We are a historical juncture once again, this time it is bigger. How far will new information and extraneous reasons help us remains to be seen. But what definitely cannot help us is the X in the axiom.

Gold - Silver Ratio (Archive)

First published on 13 Nov 2006

Did you know that the price relationship between Gold and Silver is not fixed? It varies substantially. And it has predictive value too. As in different market environments, the value of Gold is perceived differently than Silver. Gold is perceived as an important crisis commodity. As fear replaces confidence, Gold increases in value relative to Silver. For example risks of economic and political upheaval. When the market risks are low Silver is preferred over Gold, as the white metal has many industrial uses and the consumption of Silver grows in a rising economy.

The last time the value for the ratio dipped below 1 was in 1997 and then the South East Asian crisis broke leading to a bounce back in ratio. And since 1984 the ratio has never been below parity. At this stage after 22 years the ratio is headed down below 1 again. Rather it is now ruling at sub 1 level. Now there are two ways to see it, one that we are in for more prosper times that we have not witnessed since 1984. If this is true Gold should continue to fall relatively to silver, or underperform silver. Second way to look at it is that we are once again sitting at the edge of a crisis, which might be just around the corner. At this stage, we have a falling five wave ratio line. This means that there is no fear in the market and hence this maybe not an opportune time to go long on the crisis commodity yet.

Our alternate count on Silver saw the metal moving up to fill the anticipate gap level at 12.6. Our back up count on Gold also saw it touching anticipated levels. However, we still believe that Metals overall continue to move against a price overhang. Above 640 many things change for our Gold count. At this stage we anticipate resistances ahead for Gold, Silver, MCX – Gold Near, HUI – Gold Bugs, NEM Newmont Mining Corp, GFI Gold Fields Limited and XAU – Gold and Silver Index, at 640, 13.2, 9300, 340, 47.4, 18 and 144 respectively.

Deficient Market Hypothesis (Archive)

First published on 17 Feb 2007

If there is something bigger than stock market crash or a meteor crashing down on earth, it’s the death of an economic theory. After all, if the economics is right, we can still detect and divert a catastrophe. Economics is why we think we live today and is what we think will be the reason generations will live tomorrow.

We at Orpheus believe good theories are for a generation after which they are thrashed or rehashed. Scientifically the unifying theory remains elusive and somewhere the construction and reconstruction attempts have pushed scientists to recreate the laboratory Big Bang. The new emerging theories we believe will unify science and emerging economic theories, which are much broader in their scope. By the way, did you know we have Econophysics? The subject ties up Economics and Physics.

So here we are with the young, ready to bury the old. Efficient Market Hypothesis is one such theory that has reached burial ground after nearly half a century of existence. And like always markets are ahead of the event. US markets have given many cues starting 2000 that Eugene Fama’s market hypothesis might be deficient.

But what is so important about this theory that even it’s marginalizing deserves such attention globally, in India and in other emerging markets. EMH makes many assumptions. First it says that supernormal returns are not possible. DOW Jones moving up by 1000% over the theories life trashes the first assumption. You can make supernormal returns in markets. Second it says, every news that matters is in the price. This also means that any thing which can affect the price is new information. This extrapolated assumption has justified the “Impact Analysis” industry i.e. how new news will effect prices. So first there is a multi billion dollar information industry and then another multi billion dollar industry that studies the impact of the news on the asset prices (popularly known now as stock market).

The latter industry, what we also call popularly as ‘Equity Research’ is under tremendous stress in America. There are studies written to revive the industry. The crash of 2000 has questioned the accountability of research and how to make Wall Street pay for research. The best Wall Street research firm gives an accuracy of 34% with two open recommendations a week. The stresses are building up especially with Sarbanes-Oxley 2002 corporate governance act tightening around the financial intermediaries.

Overall, the industry is figuring out a revenue model for the inaccurate, unaccountable work, which takes away a sizeable part of the already shrinking market commission. Order flows are moving to electronic systems, as clients don’t want research that does not work. There is also a joke about selling ‘Equity Research’ by passing it on with a 50 dollar note inside. “Some motivation”, they call it to open the glossy in consequential pages.

And if this internal struggle was not enough, we have questions being raised about huge bonuses, and bestsellers written, rightfully asking, “where are the customer yachts?” We also have the famous Jamie Oli case. An ex tax accountant with the Dynegy, an energy trading firm. The judge presiding over the case had to rework on his Economic after Oli’s lawyers proved that it was tough to quantify the impact of news released by Oli on the price fall. In crux, American law firms have proved in their recent published research that market prices are far from efficient and sentencing someone to 24 years of prison on a flawed economic hypothesis is harsh. Recent research papers have also gone ahead and proved that New York Stock Exchange prices are inefficient. Oli finally got a reduced sentence of 6 years on Sep 2006.

Speaking from a market psychology perspective, what market fancies is what outperforms. And outperformance is not a straight line, like the Sensex outperformance of Dow since 2003 reaching a two decade low. Straight line approach is also non acceptable to changes. Big changes are not introduced at a top, big changes find their footing at a bottom. Historically it has been seen that regulators just like market participants are complacent at a market top and get into activity at a low. The other graph is the DOW marking the signing of the Sarbanes-Oxley act, at a low. And this was also the time Daniel Kahneman, the only psychologist ever got the Nobel prize for economics. And global market meltdown does not only destruct wealth, it also creates and nurtures new. And meltdowns happen when people are the most complacent. And failing theories do sink multi billion dollar industries, overnight.

Waves.Oil - Natural Gas is heading into multi year accumulation.

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WAVES.OIL is a perspective product published once a week. The report covers BRENT, WTM, XLE (Energy SPDR), top energy stocks, Natural Gas and related FUTURES. The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools and sentiment indicators. REUTERS RICS: BRT-, WTM-, .XLE , CVX.N, XOM.N, IPNG, NG-P-CAL



Without Water (Archive)

03 Nov 07 - Water, a key renewable resource, has just started a multi-year boom which should leave even oil behind

Throwing out the baby with the bath water is an idiom that has its origins on the monthly bathing ritual in Europe before the 16th century. The bath tubs were few and seniors of the house were the first to take bath, the children of the house came last. The very reason: the baby was thrown with the muddy and dirty bath water on occasions. It’s tough to validate this socionomic anecdote. But the question is that were some of our ancestors really low on hygiene or was it about water scarcity and economising of a resource? Well, the fact is that water has moved from abundance to scarcity through history and our ancestors did face a water scarcity in the past which might have forced them to change their habits. This also involved economising on bathing water and hence throwing the baby out.

Read more…

Scarcity creates water activists in Mumbai





Waves.Oil - Looking to complete wave (B)

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Can Time Triads create the head and shoulder fractals?

Time Triads recreating head and shoulder fractals is a step closer to rewriting the Elliott Wave Theory.

We have talked about head and shoulder on prior occasions. We have also mentioned that time is a head and shoulder. The time pattern was first illustrated by Tony Plummer in his book. Plummer mentioned that a stylized pattern of time was a good example of fractal geometry.

Tony Plummer’s Stylized Time Pattern

He did not give a formal pattern proof of creation for the stylized pattern. Where did the stylized pattern come from? How could it be seen across time frames? And how was it fractalled?

Orpheus Introduces TIME TRIADS

Here we have taken the Orpheus Time Triad unit and reworked on it to create the stylized pattern Plummer first illustrated in his book. The stylized pattern looks like a head and shoulder. Time Fractals, Time Triads, Time Arbitrage, Econohistory, Performance Cycles are terms coined by the author in Jan 2009.

The idealized time triad structure is made of equilateral triangles. There are three equilateral triangles, making a larger triangle and so on. Time subdivides in three and multiplies in three. What is with the formation? First and foremost: Head and Shoulder are three peaks, a large peak centered around two smaller peaks. Head and shoulder pattern is the time triad i.e. three triangular peaks. Did you ever think why a day has four prices, the open, the high, the low and the close? We just take it as standard. Ok! it does look logical to have the O-H-L-C, but the interesting part is how this classification divides the trading session into three parts. There is a part with the open and high, high and low, low and close. The three triangles of head and shoulders are there. Market literature is full of pattern ideas from human anatomy. It’s not that just chance that we find similar patterns in markets like we find in human anatomy. We find head and shoulders in markets just like we see it in human body is because time touches anatomy, the same way it transforms price.

Nature unlike markets doesn’t just move in the first Cartesian quadrant with positive x and y axis values. Nature moves in all dimensions, in free space. Fabian Helge von Koch (1870 – 1924) was a Swedish mathematician who gave his name to the famous fractal known as the Koch snowflake, one of the earliest fractal curves to be described. The Koch snowflake (or Koch star) is a mathematical curve and one of the earliest fractal curves to have been described. It is based on the Koch curve, which appeared in a 1904 paper titled “On a continuous curve without tangents, constructible from elementary geometry”. The Koch curve starts from a Triangle and in the second iteration divides each side of the triangle into a head and shoulder form. The iterations are repeated and this creates the Koch curve. Koch curve is a zooming head and shoulder bombarding in your eyes like a moving spatial star field.

The Head and shoulder pattern can even rewrite the Dow Theory and even explain the Elliott Theory. Elliotticians are known to famously quote that there are few rules in markets, mainly the EWT (Elliott Wave Theory) works on guidelines. The only two rules in the long standing Elliott Theory is that the 3rd wave is never the shortest of the three impulsing waves 1, 3, 5. What Elliott unknowingly said was that the three up legs in a five legged market structure have a bump or a head, simply putting the middle part of a market fractal is larger than the other two. The 3rd is never the shortest because of the Head and Shoulder. The pattern of time rules the Elliott fractal. There is another rule of Elliott that the 2 wave does not make a new low below the low of 1. The head and shoulder pattern of time also makes higher lows and not lower lows. A higher degree of time does indeed make more significant lows than its small degree counterparts.

So what did we do with the Time triads? We gave the smallest triangle a size of 1 unit (X). 3 units made a larger triangle (3X) and nine units made the larger triangle (9X). At all times these unit lengths are adding or subtracting. Assuming there is no translation. That is largest time is not effecting the smaller time. Putting simply the bear market is the same in potential and scope as the bull market, the markets will behave ideally, losing all the gains it made, a classic cycle.

Doing an aggregation of three degrees viz. X, 3X and 9X, we reached the Head and shoulder pattern. And as we added a higher degree head and shoulder fractals started to form.



Can the dollar index reach 200?

The 1980s high was 150, talking about a 200 dollar target is much beyond the euro-dollar parity. What could be a few reasons a target beyond previous high at 150 may start assuming some probability? First: Dollar Index has made an average 15 year cycles starting 1970′s. A bottoming cycle in 2008 at least suggests multiyear strength well into 2012. Second, Oscillators have made a multiyear non confirmation of more than a decade. Non confirmations of such large time frames could validate the time cycle case. Third: The formation from the 1985 looks more like a completing corrective than a trend. This means even if we assume an ongoing counter trend, prices could reach back to previous highs at 150.

Further questions which come to mind are how can dollar rise, while commodities also strengthen? What happens to the US crisis? We don’t have answers to these questions yet. But what we can tell you is that time cycles might lead, lag and adapt to intermarket conditions. How time cycles do it remains to be seen.

Key levels to watch lie at 80. Above 80 the surprise of the decade is probable.

TICKS.GLOBAL - 01.04.10 07:41 (GMT) EURUSD. QUARTERLY. Momentum is one way to see TIME CYCLES. The current quarterly setup, retest of multi decade support at 1.34-1.35 and RSI momentum testing key supports suggest that we need more than a Greece bailout to stop EURUSD to fall till 1.2. All bounce backs remain corrective countertrend for us till 1.38 is clearly taken out.