31 August 2005

The Primary Daily Decay Fractal Pattern - Identified - A Replay of 1929

The Monday 29 August trading day provided information that resulted in a
high probability determination of the exact length of first declining
fractal base. The trading day began with the expected nonlinear break and
then rose from the lows to end with about a .63 percent gain on the
Wilshire. Why did the total worth of US equities gain about 80 billion
dollars in value during the ongoing occasion of a devastating hurricane that
caused well over ten to twenty billion dollars in damage and disrupted both
rig and refinery production with oil rising to 70 dollars a barrel? Where
was the good equity market news here?

The unexpected counterintuitive action of the equity markets today
demonstrates the relative lack of effect of seemingly very important news
items on the evolution of the equity fractal patterns, whose evolution is
predominantly related to tens of trillions of dollars -both borrowed and in
asset equivalents- as opposed to the ten or more billion dollars lost in
Monday's catastrophic natural disaster. The market's gains today likewise,
cannot reasonably be attributed to the joy that New Orleans did not receive
a direct hit - an explanation used by some market commentators.

In a previous post in the Economic Fractalist, the first base which included
the 3 August 2005 Wilshire secondary top was initially estimated to be
between 10-12 days. Today's equity valuations reversal to the upside -from a
nonlinear drop at the opening - places the first fractal base at 11 days
-Identical to the 11 day base that occurred in 1929.

In 1929 the fractal decay daily pattern to the low was 11/27/27 days
conforming to an idealized x/2.5x/2.5x decay pattern. The second fractal of
this three fractal sequence had a high above the high of the first fractal
base. While this higher-high pattern rhymes with the 2005 major European
equities of the last 16-17 days, the 1929 US pattern was decidedly stronger
that the 2005 US equity decay pattern whose 27 day second fractal's high
will, with great probability, not exceed the August 3 2005 high of the first
11 day fractal base sequence.

From a global macroeconomy perspective it has been the US consumer who has
absorbed the majority of global debt in the last 5 years and who has been
responsible for over 80 percent of global GDP growth. The composite US
equity fractals and particularly the relatively poorly performing 16 of 27
day second decay fractal sequences, have integrated this enormous debt load
into their decay patterns. Because of this debt load the US equity second
decay fractals have been unable to best the high of their first 11 day
fractal bases. Relative to 1929, the 2005 US fractal evolution is remarkably

If this identified 11/27/27 day fractal decay pattern holds true, it will
provide the strongest of prospective evidence that the macroeconomy is
indeed mechanistic in its growth and decay and that Its summation behavior
is determined by the six underlying elements identified in an earlier post
with progression represented by ideal quantum integrative fractal patterns.

Gary Lammert