Trace Elements
A study in quantum charting as applied to the HUI Index
To the Forum
1)References
Below is Stockcharts Weekly HUI for the end of February 2004. The Blue chart line is my trace of the commercial chart. I include this to illustrate how accurate (or otherwise!) my trace is! I will use this trace in some of the figures that follow rather than the original chart, for reasons of clarity, and also to add a bit of artistry… ch-art!
Subsequent charts either use the Stockcharts trace, or the Bigcharts HUI daily/weekly diecrtly. There is not much difference between the two companies weekly charts (I overlaid the Stockcharts trace onto the Bigcharts HUI to check this). The daily has of course more detail.
2) Inverse Head & Shoulders Analysis
Many have pointed out the inverse head & shoulders in the above HUI chart, whose right shoulder is taken as beginning @ May 2001. In my first analysis I postulate a double head, with a shoulder not commencing until May 2002. (Incidentally, this corresponds exactly with my XAU analysis as disclosed a couple of weeks ago to Falcor III)
Zaphod Beeblebrox of course was the double-headed Alice Cooper look-alike and babe-magnet who was doomed to be eternally lucky in the late, great Douglas Adam's 'A Hitch Hiker's guide to the Galaxy'.
What was the spaceship Zaphod stole form the galactic government again? - ah yes- the 'Heart of Gold'. (It had the latest in propulsion - a probability drive).
Don't try to disabuse me of my opinion that everything after submitting evidence like THAT!
I thought the time symmetry going into and coming out of the head was particularly powerful evidence that we are on the right track.
The above chart shows
1) Test of the neckline, pause, then ....
2) Break of neckline then re-test, forming left shoulder then ...
3) Formation of double head culminating in a re-test of the neckline then....
4) Formation of right shoulder and break of neckline
5) And now - a possible re-test of the neckline before we launch.
3) Matrix Analysis
This is revision for those of you not familiar with my methods. Frames are equally spaced parallel line sets. A matrix is formed by intersecting frames. The HUI, like many charts I have studied, can be inserted into a frame that seems to constrain the price. It was this observation that prompted me to coin the term Quantum Chart to describe the phenomenon that price, while appearing to be continuous, is actually a series of transitions between allowed price/time frame lines. Much as matter and energy must exist in discrete states in quantum mechanics.
Before we can establish a matrix we must go through a few processes
1) Identify trend slope(s)
2) Identify 'octave' spacings
3) Draw frames
4) Check to see if frame line intersections produce additional symmetry (like vertical lines)
Doing all of this to the HUI left me with the following rather dense matrix…
By leaving out some matrix lines, the HUI channels within the matrix become clearer. Note the pink, yellow and green verticals. These are all prime candidates for the transition time from secular bear (left) to secular bull (right)
4) Ribbon Analysis
We are all familiar with a trend channel, where parallel support and resistance lines confine the price for a time. What Ribbon Charts do is to assume (rather logically I think) that any change in trend will alter the angle of both support and resistance simultaneously. By default this means that you can draw a vertical line where trend changes, through the intersection between new resistance and old resistance, and new support and old support. The resulting channel maintains a constant height, regardless of slope. Hence a rapidly rising or falling chart will have a much narrower channel than a fairly static one.
You can make different Ribbon Charts from the same plot - several paths are shown above. Olive is interesting . If we are to get a mirror, surely at some point the price must migrate up to a narrow channel? The Olive Bear channel is de facto, the Olive Bull has yet to emerge and is speculation at this stage.
5) Spectral Analysis
This next chart takes as its starting point the three vertical Bear/Bull lines. (Sorry about the mixed metaphor there) .Centred on each of these lines is a spectrum. A spectrum seeks to identify ripples (peaks and troughs) equally-spaced about a point in time.
Note : to help you navigate the mirror pairs, use the pointer of your mouse to trace around the chart.
The strongest spectrum appears to be the green. Incidentally, aligning this green centre-line with a frame line places it slightly to the left of the central peak - bisecting a double peak in fact. This means that the mirror of the spike down (see white resonance pair in green spectrum) may not be over yet. If we do get a pull-back before the next slingshot, how low can we go?
6) Wave analysis
Before I try to quantify target level, I have another chart to show you. The following wave analysis unequivocally identifies a sinusoidal influence with a frequency corresponding to the vertical pitch chosen in 'Matrix Reloaded.'
The HUI mostly corresponds well with a sinusoidal whose wavelength = the pitch in the Matrix Reloaded vertical frame. However there is massive divergence, most notable in the blue regions equally spaced about the green vertical. To account for this I have drawn two other functions - x3 and x7 wavelength.These functions dominate the chart in terms of amplitude, at least until we reach the relative calm waters of the Olive Channel in the Ribbon Chart. The longer wave interacts with the shorter on. When they are in phase they tend to sum. When they are out of phase the longer wave tends to dominate. Projecting these waves forward from here we get
X1 limited downside possible in short term
X3 rising
X5 rising
7) Holistic Analysis
This last chart attempts to combine what we now know about the HUI and its patterns to quantify price and time objectives.
Both H & S and Spectral analyses seem to predict big moves up if we look in their respective mirrors. The red frame lines look very powerful as they delineate the chart well, and will likely be the start and end of rocket moves. Either scenario (spectrum or H & S) should have the power to reach the next red line (above the neckline) @ around 350. However, the two combined, if the vectors were to be summed (white & blue arrows) would take us higher still. Likely targets would then be the white circle (shown in the spectrum mirror also) or even the next red frame line. That would be @ ca HUI 500!
Summary
The coming up-move therefore is predicted by conventional Head & Shoulders analysis, Wave analysis and Spectral analysis. It is predicted to be a minimum of 335 (H& S) and a possible maximum of 500-ish. The move is expected to commence soon and to be swift.
In the end, the HUI will do what it will. I consider buying shares in companies in which I have no practical involvement to be a form of gambling. To me the work involved in charting is my investment - of time and effort - to produce something of value. I hope.
Rodin 1 March 2004
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