MarketTrak Question/Comment Message

Posted By: Jim   Date: Sun Jun 7, 2009

Title: Cycle Analysis Model

  Can you say more about the equation that is being used in the cycle analysis model?

  The equation that is being fitted is shown below:

  where in this equation t is a day number and the unknowns are: a, b, c, d, e, and f. Note that the unknowns c through f are subscripted with the sum over i running from 1 to 6. There are therefore 26 unknowns (parameters). We use a non-linear, least-squares procedure and the last 400 days of djia closing prices to determine the 26 values. Once we know what these values are, we extrapolate time out 20 days to show what we hope is an accurate picture of the future trend of the djia. The model is still experimental and should not be used for trading. Recent tests indicate an accuracy of about 64 percent in predicting the trend over the next five trading days.

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