Introduction.
The Formula.
Our computer models use spectrography (spectral analysis) to produce high-level, second-generation quantitative indicators that are precursors to a new approach in the analysis of financial, economic and scientific movements. The mathematical formula used is:
In finance, one of the first basic rules is...
1. A good positioning is... downward or upward? For the short, medium or long term?
To have a good positioning, whether upwards or downwards, it is essential to have a perspective on several horizons, its means to be able to visualize simultaneously the possible trends in the short, medium and long term.
As you will see in our examples, the first strength of our quantitative model is the fact that it is based on cycle analysis. This allows it to determine not only short-, medium- and long-term trends but especially the duration of the current cycle and how much time it has left before changing direction.
As you will see in our examples, the first strength of our quantitative model is the fact that it is based on cycle analysis. This allows it to determine not only short-, medium- and long-term trends but especially the duration of the current cycle and how much time it has left before changing direction.
2. Example of positioning.
You hold a stock XYZ, and its weekly chart announces the beginning of a bearish cycle, is it time to position yourself on the downside and sell or is it rather a buying opportunity because the decline could be only temporary?
The answer is in the monthly chart. If its cycle is firmly established on the upside, then we are more in the presence of a buying opportunity if there is a decline. We then position ourselves to take advantage of the temporary decline that is coming.
For more details, daily, two-day or ten-day charts are also used.
3. A good timing… on the next turning point.
The answer is in the monthly chart. If its cycle is firmly established on the upside, then we are more in the presence of a buying opportunity if there is a decline. We then position ourselves to take advantage of the temporary decline that is coming.
For more details, daily, two-day or ten-day charts are also used.
Most stocks have innate cycles and when they are identifies, it is then possible to locate with a high degree of certainty the next turning points, i.e. the next Max and Min points. This is the second strength of our spectral analysis model.
A good timing is therefore to identify and wait until the Max and Min points are reached before going long or short.
4. Examples of titles with clockwork synchronicity:A good timing is therefore to identify and wait until the Max and Min points are reached before going long or short.
We can already extrapolate the next turnaround zone and how long it will take to reach it.
The indicators.
Treasury Yield 30 Years
First, let's note that on the daily chart presented below, we have extrapolated the last closing value of the bond over two additional periods, in red bars on a yellow background.
Then three indicators are presented, the first in A being well known, i.e. a Momentum followed in B and C by our Slow Spectral and Fast Spectral indicators.
Then three indicators are presented, the first in A being well known, i.e. a Momentum followed in B and C by our Slow Spectral and Fast Spectral indicators.
To make the above three indicators intelligible, we now overlay them with the Cut-offline, a triangular curve generated by our computer model.
When the indicators are above the Cut-offline, the stock is rising and falling when the indicators cross the Cut-offline.
When the indicators are above the Cut-offline, the stock is rising and falling when the indicators cross the Cut-offline.
We add a fourth indicator in box D, a rectangular cyclic curve. This curve provides us with three pieces of information:
- The reliability of the cycle used: the more equal and symmetrical the spacing, the greater the level of confidence in the identified cycle.
- Detection of Phase shifts which are explained later.
- Symmetrical extrapolation to locate the next reversal zone of the stock.
- Note that Max and Min points are relatively well identified.
Thus, we can better situate a stock in its progression, its means are we at the beginning or at the end of a trend… good timing. - Strangulation zones == strong potential for gain.
For example, above on the weekly chart, we have at point X the momentum which is at a peak, and it can only continue its path by crossing the Cut-offline downwards. Similarly, at point Y, it is at its lowest and will have no choice but to go back up by crossing the Cut-offline upwards.
Unless there is a reversal by Phase shift (as described below), the potential for gain is fantastic when a strangulation point occurs. - When the rectangular indicator D is very symmetrical, we can determine the next reversal zone by extrapolating it as shown below.
This allows us to visualize the time remaining before a stock begins its trend reversal.
Again, this is a plus in our toolbox for getting the timing right!
Phase shift.
Cyclical movements have three characteristics: frequency, amplitude and phase.
Phase shifts occur regularly in financial fluctuations and present an opportunity for gains when they are identified.
1. Normal cycle on t1 and t2, no Phase shift.
2. Phase shift stretching over half a cycle, t3.
3. Phase shift of a full cycle, t3 and t4.
4. The indicator that announces a Phase shift.
In the circle above, when the momentum line crosses the Cut-offline downwards but does not stay there for long and crosses the Cut-offline again upwards, this indicates a strong movement whose current cycle will stretch for either half or another full cycle.
Note how it is easier to determine when the rise (or fall) will end. Also note that the movement following the end of a Phase shift is often very pronounced. Last observation, when the momentum line quickly crosses upward the Cut-offline again, cover immediately yours short positions!
Phase shifts occur regularly in financial fluctuations and present an opportunity for gains when they are identified.
1. Normal cycle on t1 and t2, no Phase shift.
Note how it is easier to determine when the rise (or fall) will end. Also note that the movement following the end of a Phase shift is often very pronounced. Last observation, when the momentum line quickly crosses upward the Cut-offline again, cover immediately yours short positions!
Static versus Dynamic lines.
In bloc A, the oscillator is a static line. It's like a moving average line, today point on the chart won’t be affected by tomorrow new data.
All the other lines on our charts are dynamic lines.
They are like Bezier curves or best fit curves. Its means that the today point position can be altered by the next days data.
Warning:
As seen above, some stocks had the same stable cycle for many years like the waves on a lake, and we profit from this.
However, if a sudden and major unexpected event hits a stock, our cycle analysis will be disturbed and reset, will have the same effect as if a rock is thrown into the lake.
All the other lines on our charts are dynamic lines.
They are like Bezier curves or best fit curves. Its means that the today point position can be altered by the next days data.
Warning:
As seen above, some stocks had the same stable cycle for many years like the waves on a lake, and we profit from this.
However, if a sudden and major unexpected event hits a stock, our cycle analysis will be disturbed and reset, will have the same effect as if a rock is thrown into the lake.
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Maestria Quantitative Research - Robert Cyr