20 November 2005
The Third Fractal Solution
Friday's Wilshire close above the 3 August 2005 integrated daily average
provided the impetus for yet a third fractal solution to the ongoing query
into the exact nature and evolution of the coming global macroeconomic
and equity valuation devolution. Exhaustion gaps to new multiyearly highs
were witnessed in a number of the premiere world equity composite indices.
These gaps and new highs occurred in the context of evaporating cash
reserves in US mutual funds, record new European bankruptcy filings,
inflationary pressures on consumer wages, loss of white collar jobs at
US manufacturing plants, profit loss and lurking bankruptcy
possibilities for GM,
negative consumer savings rates, and a negative endorsement of US
governmental fiscal practices by the Comptroller of the United States.
Why then, with all these bad internals, did the Wilshire make a new high? The
answer is simply this: there is still a positive quantity of money
competing in the equity markets to complete, as of yet, an
indeterminant but paradoxically deterministic
and non complex ideal maximal growth fractal. While it is possible
that Friday was the maximal valuation day for the Wilshire with decay
patterns as described in previous postings, there is an an additional
possibility
that merits attention and involves 7 more trading days to a maximal
final saturation point.
This possibility requires a re look at the valuation activity in early
August 2004.
The fractal sequence dating from August 2004 has been repetitively quoted as
a 52/130/130 maximal growth sequence using a base of 52 days. A
reasonable alternative base is 56 days vice 52 days. The first day of
this 56 day sequence is the last day, day 68 which ended in a gapping
nonlinear lower decay fashion of a 28/69 (x/2.5x) internal sequence.
Day 68 and the 28/69 fractal sequence was interpolated in a slightly
larger 29/73 day fractal sequence that jointly composed the declining
second fractal sequence of 40/100/100 days. Day 100 of the third
fractal sequence of 40/100/100 was
the high in January 2005.
The interpolated fractal pattern might serve as a fractal clue that
interpolation of fractal patterns (patterns within patterns)might be
something to be anticipated in future growth evolutions. Just as the
28 day sequence with its 69 day low was contained in a slightly larger
29/7273 day sequence with a 7273 day low, the subsequent 52 day base
may be interpolated in a slightly larger but 'correct solution' base of 56
days which includes 4 days prior to the 52 day original base.
With a base of 56 days, the next anticipated low is day 140. On
exactly day 140, a nodal low was made on the Wilshire.
Using a base of 56 days originating in August 2004, the maximal
equity valuation growth sequence that conceivably might consume all
available inthemarket cash, before investment is shifted from
equities into debt instruments would be a fractal sequence of:
56/140/140 vice the interpolated 52/130/130.
Note that the nonlinear break defining the second fractal occurred on
day 120 or 15 April 2005 with nodal low days on both day 130 and day
140 supporting the concept of two simultaneously evolving interpolated
fractals.
In the proposed 56/140/140 daily maximal growth fractal series, the
Wilshire has completed day 133 of a maximal 140 day with 7 trading
days left to maximal completion, maximal growth, and terminal
saturation. A gap exhaustion key reversal day exactly on day 140
would serve as the ideal technical hallmark and support the deterministic
notion of market valuation evolution.
Interestingly Google likewise has the potential of a maximal fractalet
extending the maximal daily fractal series of currently 11/28/27 0f
28 days. In the last 28 day third fractal series a potential extension
subfractal series of 6/15/8 of 15 with 7 more trading days to a final
top.
Likewise the Wilshire has an identified subfractal series of 4+/11/4
of 11 days to a saturation point with 7 additional trading days to a
top.
The ideal low for this fractal pattern would come 56 trading days
after the 140 day top such that the length of sum of first two daily
growth fractals equaled the sum of the third growth fractal and the
final decay fractal 56 +140 = 140 + 56.
There is potential agreement and confirmation from a long term weekly
perspective where the sum of the length of the first two weekly growth
fractals are equal to the sum of the third weekly growth fractal and
the weekly decay fractal with a possible sequence of:
(6 +22) +54 =(12+30+ 28 of 30 third growth sequence) +12
or first weekly growth fractal = 27weeks
second weekly growth fractal = 54 weeks
third weekly growth fractal = 12/30/28 of 30 or 68 of 70 weeks
decay fractal = 12 weeks
Gary Lammert
