27 December 2005
Macroeconomic turning points are not caused by changes in mass
psychology. Rather mass psychology is a dependent variable that is
causally changed by the transitioning major economic conditions that
exist and characterize the asymptotic saturation level and the money
creation peak area of the cyclical complex debt-money-asset
macroeconomic system. It is at this peak transition saturation and
inflection area that the collective ongoing wages of the masses of
earners can no longer support additional debt load to acquire
overvalued and overproduced assets. It is at this point that
retrenchment and devaluation occurs. It is here where fractal growth
levels off or reaches a zenith point ....and thereafter decays usually
with an incipient nonlinear deflationary crash..... Mass psychology
then follows the macroeconomic mechanistic debt liquidation - asset
deflation optimal fractal decay evolution.
The recurrent patterns of fractal growth and decay strongly suggest
that there is an extremely efficient mechanistic market and
debt-money-asset system. This entity, while complex in its component
parts, appears to operate and to behave in an integrative fashion
in elegantly simple and optimal mathematical growth and decay fractal
patterns. For the last two or so months terminal investment money has
rotated out of the housing industry and, for one last 2.5x blow-off
equivalent fling, rotated into the equity market for its final growth
phase. Supporting this notion, HGX, a housing proxy index, has
under performed the Wilshire in the last 2 months.
The final blow off for the Wilshire started in the area of the natural
top of the third sub fractal of a third major fractal whose first
fractal base started in August 2004. A 52/130/(12/31/28) fractal
sequence has been repetitively identified. The 28th day of this final
12/31/28 third fractal sequence was 3 August 2005. 3 August remained
the 2000 secondary top for the Wilshire until November 2005. 3 August
2005 Wilshire was additionally day 16 of a 19 day first base for the
curvilinear x/2.5x/2.5x blow-off terminal fractal sequence. A low for the
second fractal of this sequence was made on day 47 (plus) on October
13, 2005. The lower high at day 47 of the third fractal was made on 16
December 2005 concluding a fractally classic curvilinear blow-off of
There are two very interesting possibilities for primary bottoms; one
ends in 13 trading days and one ends in 17 trading days which matches
the 23 December posting. Both involve fractal symmetry of growth and
decay periods dating from August 2004 whereby the sum of the first and
second fractal growth periods equals the sum of the third growth and
the decay period.
In the 13 day scenario :
First growth period = 52
Second growth period = 130 days 2x
Sum of 1st and 2nd fractal = 181 days
The Third growth period was extended by the 19/47/47 day blow-off and
consisted of a 12/31/28 grow period where day 28 was 3 August 2005.
The 19/47/47 curvilinear blow-off took the market through 16 December
2005 for a total of 162 days. These leaves 20 days to a low. 7 have
been used with 13 more to an ideal low.
In the second scenario the 4 days antecedent to the 52 days are
incorporated in the base sequence. The 56/140/140 interpolated fractal
has been previously identified, the 140th day of the third fractal
representing a bottom a 9 day cup that resulted in the temporary high
and reversal day on 6 December that was only exceeded by days 45,46,47
of the third 47 day fractal of the 19/47/47 terminal sequence
occurring on 14,15,16 December 2005.
In this scenario the sum of the first and second fractals and using
underlying lines to determine fractals grouping equal 56 + 130 or 185
days. In this scenario there are 17 trading days to a primary bottom.
Notice in both of these scenarios the fractal decay determining the
primary decay fractal will involve less than 2-3 percent of the total
growth and decay cycle dating from August 2004.
This fractal proportionality is consistent the 60-80 year cycle
whereby the decay cycle to the ultimate major low, starting a new cycle,
occupies less than five percent of the combined growth and decay cycle.
Possible subfractal decay cycles are 4/10/10 and and as previously
As previously noted in multiple prior postings, near the crash phase
at the end of major cycles, money exits equities and flows into long
term debt instruments, driving interest rates lower. Yesterday smart
money flowing into and locking in 10 year long term interest rates of
4.25-4.5 percent inverted the 2 and 10 year US debt notes.
activity corroborates the upcoming deflationary scenario.