Depression Watch (Feb.16-Feb.19.2009)

{Dow}
(Thurs) =        7,465.95      89.68 (-)
(Wed) =                7,555.63    50.65 (+)  
(Tues) =        7,552.60    297.81 (-)     
(Mon) =                closed
last week's range [7850, 8271]
last week's range (change) = [7, 382]
Nov. 20 bear-market low of 7,552.29

{VIX}
(Thurs)     =                 47.08 (-)
(Wed)    =                  48.46  (-)
(Tues)  =                   48.66 (+)
(Mon)    =                  closed
Normal   =                30 [3 +/-] {Best Fit Curve: Trig. function}
last week's wk-avg =  44.41
last week's range [41, 47]

{Oil}
(Thurs)     =                $38.76  (+) ;  
(Wed)       =               $34.75   (-) ;             
(Tues)    =                $35.05    (+) ;
(Mon)    =                $closed ;     
last week's range [34, 40]

{Dollar Index}

(Thurs)     =              87.55 (-)  
(Wed)       =              88.03 (+)           
(Tues)    =               87.63 (+)
(Mon)    =               closed (+)
last week's range [85, 86]

{Baltic Dry Index}

(Thurs) =              2,057.00      71 (+)
(Wed) =                  1,986.00       91 (+)
(Tues) =                 1,895.00      49 (+)
(Mon) =                  1,846.00    62

{NI225 - Japan}

(Thurs) =        7,557.65      23.21 (+)
(Wed) =              7534.44  111.07 (-)
(Tues) =             7645.51  104.66 (-)
(Mon) =              7750.17

{HK:HSI - Hong Kong}

(Thurs) =        13023.36        7.36 (+)
(Wed) =             13016.00    70.60 (+)
(Tues) =             12945.4
(Mon) =              13455.88    98.79 (-)

{BLS}

Unemployment =  7.6% (Jan.09)


{Last Week}

In math there is only one type of number, and rounding any number reduces the accuracy. However, this is not true in physics. In physics numbers are measurements, or calculations of measurements. Here the limitations to accuracy stand beyond the control of math. Consequently, in dynamic modeling, round can actual serve to improve the accuracy of a model. For example, in our case, we need to create a container that identifies normal movement (a normal trading range). How we set the rounding of the bounds, will determine the quality of normal trading range, and allow us to separate significant movements in the market, from option plays or market manipulation.

{This Week}

Our current model is working well, significant moves outside the appropriate ranges are being identified. Understanding the use of ranges helps us filter out all the noise coming from the media, and focus solely on the numbers. It needs to be understood, that we are modelling a dynamic system and there is no prediction - there is only an approximation. The goal is the achieve the closest approximation.

We found that the DOW provided the closest approximation to the economy, and that while the VIX improved our understanding, it wasn't (and isn't) as sufficient as the range identification. As such, we removed the S&P 500 from our model (leaving the VIX). Next, we found that the Asian markets did have an effect on the DOW, so two markets were selected to track against the DOW. These are the Hong Kong : Hang Seng Index and the Nikkei. These markets have been added to the Dollar Index and the Baltic Dry Index.

Powered by ScribeFire.