Tuesday, August 4, 2009

Dow July-October 2007, Augmented, Fractal

Dow charts again today, as I noticed a curious thing. I was looking at the Dow Jones Industrial Average 3-year daily chart that covered the period during which the index ran to the top in October 2007. It suddenly occurred to me that what we've been experiencing since October 2008 is basically the repeat of July - October 2007, except it's taking much longer this time and on a much bigger scale.

To show you what I mean, take a look at these charts. The top chart is Dow daily chart from July 17 to October 15, 2007. The bottom chart is Dow weekly chart from the week of September 22, 2008 up to now. The top chart, daily. The bottom chart, weekly. Don't they look very similar?

The blog post's title, "Augmented", refers to a musical term. In music and music theory, "augmentation" is lengthening and/or widening of rhythms, melodies, and intervals. The same construction of the passage but the time is extended and the content (rhythm, melodies, etc) exaggerated. "Fractal" refers to a mathematical term. A fractal is generally "a rough or fragmented geometric shape that can be split into parts, each of which is (at least approximately) a reduced-size copy of the whole (wikipedia.org).

If what I'm seeing is an augmented market and the original was that of July-October 2007, then the top of the current run will be somewhere very close to the beginning of the swoon, which will bring Dow to about 11,240 - and that's where 61.8% Fibonacci retracement from the October 07 top to March 09 bottom sits, like I showed in yesterday's post. From the looks of them, we may have another 3 to 4 months till the market "tops" again, if I count the top chart's days as weeks in the bottom chart.

Mind you, I'm not saying that's what's going to happen. That's really a long way up. But I'm just fascinated that despite the market manipulations and all that high-frequency computer trading that wouldn't give @#$% to the mother nature, the index chart still manages to show what makes up the world - nature repeats the pattern in different sizes and time frequencies.

No comments:

Post a Comment