23 July 2008
Look at all that red! The recent Vee bottom is interpreted by the heatmap as a piece of a short term cycle.

Trend/Cycle Heatmap
The Trend/Cycle heatmap is similar in concept to the Hurst Coefficient with the added advantage that it shows uptrends and downtrends. This indicator measures the strength of the trend across the lookback period compared to the cycle amplitude within that same period. Uptrends are shown in green, downtrends are shown in red, and blue denotes the cycle amplitude is stronger than the trend. This indicator varies with the length of the lookback period. In the display, a horizontal slice through the heatmap denotes the relative trend and cycle amplitudes at a fixed lookback period. A vertical slice through the heatmap shows the relative amplitudes over a range of lookback periods for the particular selected price bar.

Posted by John at 9:47 PM | Permalink | Comments (0) | TrackBacks (0)

22 July 2008
The Signal to Noise Ratio is so low that any cycles-based signals should be ignored.

Signal to Noise Ratio
The amplitude of the dominant cycle is normalized to the amplitude of the noise. Noise is defined as the average daily trading range. Unless the cycle amplitude is much greater than the noise, the use of cycle-based entries and oscillators should be avoided because the uncertainty of getting a good entry and exit point during day can negate any potential profit realized from the cyclic swing.

Posted by John at 9:53 PM | Permalink | Comments (0) | TrackBacks (0)

21 July 2008
The turning point from the end of the long downtrend is probably interpreted by the software as the low of a long cycle. You will see tomorrow that the Signal to Noise Ratio is still very low, and therefore very little credence should be place on the spectral measurement.

Spectrum
We measure all the cycle components in the market data over a range from 6 bar cycles to 30 bar cycles. Continuity of the cycles can be seen in the heatmap that is in sync with the barchart above it. Amplitudes of the cycles are colorized from white hot (yellow), through red hot (red), to ice cold (black). Knowing the dominant cycle period is useful for making conventional indicators adaptive to current market conditions by setting their computational window to be the dominant cycle period or half the dominant cycle period, depending on the indicator being used.

Posted by John at 10:02 PM | Permalink | Comments (0) | TrackBacks (0)

18 July 2008
The recent upturn from the long downtrend has caused the data to be random over the shorter lookback periods.

Hurst Coefficient
The Hurst Coefficient is a measure of randomness in the market, and varies over a range from 0 to 1. 1 signifies the data are persistent. 0 signifies the data are antipersistent (cyclic). A value of 0.5 signifies the data are random. I have colorized the Hurst Coefficient to be green at a value of 1, red at a value of 0.5 and blue at a value of 0. The colors are mixed to show the gradual transition of the Hurst Coefficient. The Hurst Coefficient is a function of the lookback period used to compute it. In the display, a horizontal slice through the heatmap denotes the Hurst Coefficient at a fixed lookback period. A vertical slice through the heatmap shows the Hurst Coefficient over a range of lookback periods for the particular selected price bar.

Posted by John at 11:01 PM | Permalink | Comments (0) | TrackBacks (0)

15 July 2008
Since the market has been in a pure downtrend, it is no surprise that the cycle amplitude is low to nonexistant. Therefore, the Signal to Noise Ratio is very low - the Noise has remained about constant.

Signal to Noise Ratio
The amplitude of the dominant cycle is normalized to the amplitude of the noise. Noise is defined as the average daily trading range. Unless the cycle amplitude is much greater than the noise, the use of cycle-based entries and oscillators should be avoided because the uncertainty of getting a good entry and exit point during day can negate any potential profit realized from the cyclic swing.

Posted by John at 1:35 AM | Permalink | Comments (0) | TrackBacks (0)

14 July 2008
Since the market has been in nothing but a downtrend recently, the cyclic content is virtually nonexistant. A few mixed spectral lines are showing, but there is no real dominant cycle.

Spectrum
We measure all the cycle components in the market data over a range from 6 bar cycles to 30 bar cycles. Continuity of the cycles can be seen in the heatmap that is in sync with the barchart above it. Amplitudes of the cycles are colorized from white hot (yellow), through red hot (red), to ice cold (black). Knowing the dominant cycle period is useful for making conventional indicators adaptive to current market conditions by setting their computational window to be the dominant cycle period or half the dominant cycle period, depending on the indicator being used.

Posted by John at 9:26 PM | Permalink | Comments (0) | TrackBacks (0)

11 July 2008
The Hurst Coefficient joins our Trend/Cycle Heatmap as showing nothing but a downtrend at all lookback periods.

Hurst Coefficient
The Hurst Coefficient is a measure of randomness in the market, and varies over a range from 0 to 1. 1 signifies the data are persistent. 0 signifies the data are antipersistent (cyclic). A value of 0.5 signifies the data are random. I have colorized the Hurst Coefficient to be green at a value of 1, red at a value of 0.5 and blue at a value of 0. The colors are mixed to show the gradual transition of the Hurst Coefficient. The Hurst Coefficient is a function of the lookback period used to compute it. In the display, a horizontal slice through the heatmap denotes the Hurst Coefficient at a fixed lookback period. A vertical slice through the heatmap shows the Hurst Coefficient over a range of lookback periods for the particular selected price bar.

Posted by John at 11:07 PM | Permalink | Comments (0) | TrackBacks (0)

10 July 2008
The downtrend is showing signs of weakening. Look for a reversion to to mean.

Detrend
The detrend indicator is created by filtering the price data in a high pass filter, thereby removing the low (trending) frequency components. The detrended data is rescaled relative to the +one Sigma and –one Sigma variations over the last dominant cycle. A price swing outside the one Sigma points usually signals a reversion to the mean.

Posted by John at 10:14 PM | Permalink | Comments (0) | TrackBacks (0)

9 July 2008
There is no surprise that the Trend/Cycle Heatmap only shows a downtrend for all lookback periods.

Trend/Cycle Heatmap
The Trend/Cycle heatmap is similar in concept to the Hurst Coefficient with the added advantage that it shows uptrends and downtrends. This indicator measures the strength of the trend across the lookback period compared to the cycle amplitude within that same period. Uptrends are shown in green, downtrends are shown in red, and blue denotes the cycle amplitude is stronger than the trend. This indicator varies with the length of the lookback period. In the display, a horizontal slice through the heatmap denotes the relative trend and cycle amplitudes at a fixed lookback period. A vertical slice through the heatmap shows the relative amplitudes over a range of lookback periods for the particular selected price bar.

Posted by John at 9:42 PM | Permalink | Comments (0) | TrackBacks (0)

8 July 2008
The reason the Signal to Noise Ratio is so low is that there just is no cycle amplitude to speak of.

Signal to Noise Ratio
The amplitude of the dominant cycle is normalized to the amplitude of the noise. Noise is defined as the average daily trading range. Unless the cycle amplitude is much greater than the noise, the use of cycle-based entries and oscillators should be avoided because the uncertainty of getting a good entry and exit point during day can negate any potential profit realized from the cyclic swing.

Posted by John at 9:54 PM | Permalink | Comments (0) | TrackBacks (0)