Dec

13

My transparent, stretchable Fibonacci overlay seems to be successfully identifying price levels around which the main indexes cluster. This in itself does not predict the future, it identifies where the holes are on the bagatelle table, but not which one the ball will settle in. Moreover it may reflect a self-fulfilling prophecy rather than a rule. Nonetheless, the information can be useful in constructing multiple-leg options positions.

But my overlay is not predicting timing. All the pundits mention Fibonacci but this does not seem to be the case, has anyone tried other methods? Interested in any pointers.

Looking forward to stepping back in the water, but want to maximise the acuity of my toolset first.

I found this nice online chart for streaming SP500, also gives longer term charts.

Jim Sogi writes:

Not sure what you're doing, but I've been pondering time and time frames and relationships of time. Some systems using returns have time exits and a study of time seems like its important. Not sure exactly how, but the idea is to maximize return based on time while minimizing loss. The relationships change by cycle. It seems time itself and speed and roc volatility all have cycles in time. Perhaps survivorship times give some info.

Bill Rafter writes:

The question is whether one wants to value time or eschew it. Both can be done, so it's up to the practitioner.

Valuing time is easy, as most economics is time series processing. And most all market data comes dated. Shunning time is trickier; do you want to avoid just some time, or all of it?

Point & Figure analysis is what most subscribe to if they want to eliminate some time, and they do that by defining "box sizes" or the minimum move they consider significant. The theory is to define the noise level and throw that noise away. Sounds great, such that someone would be willing to be a tad late on a move if the signal had a higher degree of accuracy. Our extensive research says that P&F is certainly a tad late, but there is a decrease in accuracy. Here's another caution: most of the literature on P&F is written by those lacking native intellectual capacity (IMO) who have no concept of research. To them P&F is a religion akin to animism.

A more successful approach than P&F is not to create box sizes, but to drop all "inside days". I say more successful in that you eliminate insignificant data, and do not lose accuracy. However we have not been able to increase accuracy over normal data analysis. But we are still working with it, and may find something. You still get a time grid, but with lots of the days missing.

The most effective way to eliminate all time is to use Lissajoux patterns. That link will give you an animated example of such with two sine waves. There are lots to be said about this, but I don't think many have the appetite for it


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  1. IDon't Know on December 13, 2012 8:17 pm

    I think I would like to learn more about Fibonacci. I have to say, in my past experience I always thought it was pretty much bunk. At least in the markets. But there is truly something beautiful and profound about how this is all through nature.

    There does seem to be something to cycles. Just like we see cycles in other areas of life but we still do not understand them fully. I think cycles are highly connected to chaos. Now, the thing to ponder I guess is why some cycles work? Why would this stuff work? I don’t know this, this is why I would like to learn more. But, I was also wondering and thinking, maybe it is beyond us to even really know why some of these things do work. That doesn’t mean we shouldn’t try to understand them.

    This might be more nonlinear. Maybe we are dealing with trying to analyze something that is very holistic.

    Think maybe this way; we all seem to have general ideas that we are unable to articulate, but they can be right. Sometimes they are hard to articulate because we have to break them down and conceptualize them. Conceptualization is limiting. This make them loose their wholeness. Even though the words are the best things we can do. Maybe the same is with math in some way. I don’t know. Music seems to me to be more of a fluent form of math. Like water. Markets maybe are more like this. The signals that we can pick up subconsciously in the markets maybe signals in noise that we cannot articulate easily. This seems to also be like music which seems to me to be much more of a subconscious thing. Poetry and music share similarities, and are probably the oldest form of human communication because people used to do it to memorize things. It is easier to remember things in verse and rhyme. It seems our modern age has suffered memorization abilities from always writing things down for instance.

    This also seems to me to be also maybe where the realm of ethics deals with. Hard to articulate but we know things.

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