Research – Shocking there is Order in the Chaos
COMMENT: Martin,
I trust you are doing well this weekend.
I have been looking at the eight cycles of mini rallies and mini corrections we have had in the S&P 500 for the past year or so (eight cycles from 2012-11-16 through 2014-02-05). I tallied up the total days (305) and was calculating the average days per rally (25.8) and the average days per decline (12.4). I know, pretty boring so far.
However, I then decided to calculate the ratio of each decline period to the preceding rally period to find the average decline ratio: 0.56875. I know, still pretty boring.
Finally, I decided to do the same thing to calculate the advance ratio, dividing each rally period by the preceding decline period.
Ding! ding! ding! ding! ding!
The answer: 3.14.
And on that note, have a good evening, and a happy Lord’s day tomorrow.
-DB
ANSWER:
The Ratio of Advance to Declines tend to arrive at Pi in a bull market and it will shift to the Decline v Advance in a bear market. There is incredible hidden order within everything and Pi seems to be the perfect cycle. The 25.8 is 3 x 8.6 and the 12.3 is 13 or half the volatility cycle. Welcome to the world of Dynamic Thinking. Most people can only see a straight line reducing everything to a single cause and effect – this happens because of that. Such thinking is rather simple-minded – boring, and suitable for government employment.
Do not worry, they tend not to discover anything important. Only when you open your mind can you see the hidden order to the chaos in everything that surrounds us. The closed-minded try to attribute everything to the gods of conspiracy who manipulate the world. One day it is the Fed, then the banker, the Rothschilds, and so on. They are like the Ancient Greeks with their may deities. We tend to wrongly call them pagans. But the Greeks did not see these deities as an actual god as being a creator. Instead, they went to the temple of Poseidon with gifts to say they were about the travel, please do not mess with me. They built temples to their conspirators hoping they would leave them alone. We just spin stories mixing fact with fiction.
Our mind functions on a dynamic basis, yet we try to reason in a linear cause and effect manner. Never stop exploring. Always imagine what if ? Indeed, there is a whole new world out there – our problem is the vast majority are trapped in this linear world not much different from the majority who use to think the world was flat. One day soon – their eyes will open and suddenly say – OMG. This is the structural design. How could I have never seen it before!
