Sunday, March 12, 2017

Current Market: Adding to the mathematic "aha's" and hints of mathematic market structure

"Every market high and low is caused by another point in the market."  Or at least, that's the belief that WD Gann expressed dozens of times.  That there is a cause and effect in everything and markets are not exempt.

And that's what I'm increasingly finding in the current DJIA from the 2000 top.  Beginning with the 2000 top and ending with the present all-time-high of only a week ago, there are 5 market market pivots.  Those points are each related to the other by the market metrics which were presented HERE.  No, ladies and gentlemen, we aren't talking about a "Gann fan" or Phi spaced support and resistance levels...stuff that shows there are rhythms and approximate cycles but which are woefully short in saying "this is the one price and the one time."  We are talking about structured mathematics between each of those 5 in price/time; the one and only price at the one and only one time.

And lest we forget; the stock market was only Mr. Gann's laboratory of spacetime in my humble opinion.  This time I'll give you the exact quotation:

In my suspicion, Mr. Gann had, by the time of that quote, already worked out the four-dimensional structure of the market and had, as well, applied that mathematics to personal and world events using the Law of Vibration and Luo Clements' (imo, WD Gann) methodology.  Remember also from the Ticker Interview that stocks are like the elements of the Periodic Table; they can be classified by their "number" and those within a class of similarity behave similarly.  Didn't Luo classify names by number and specify that those of the same class (3,6,9 or 2,5,7, etc) react and behave similarly?  So, if I or someone am ever able to specify the mathematical structure of the market with Mssrs. Gann and Cowan's instruction, that's only a minute beginning.  The market is the "simple" case.  Its the amoeba in the petrie.

Now, back to the "aha's" of the current market.  There are so many "aha's" in the 17 years of the current market I'm overwhelmed.  Of the 5 real price/time points (A, B, C, D and prospective E), each  is the original for at least 4 Price Time Vectors (PTV).  Those vectors from each point are mathematically related to one another.  And because those PTVs joint at other real price/time points, every PTV must be related to every other PTV.  It is just a matter of taking the time to figure out the math.

We're talking about a lot of time to work out all the math.  If we have 10 real vectors and every one is related to the other then there are a lot of combinations and a lot of relationships to work out.  Perhaps 10 factorial or 10X9X8X7X6X5X4X3X2X1 = 3.63M relationships?  No, that's not right because order is not a factor.  Maybe its 10! less 9!  Still, 90 relationships is a lot to assess.  Regrettably, I do not recall from that statistics class from 40 years ago in combinations, permutations and probability the model that needs to be applied here but its only a confirmation of what I intuitively know; there are a lot of "aha's" that can be worked out from this exercise.  I will only rigorously and completely work out one of the PTVs that are associated with one point and a couple more of interest and of necessity.   To start, let's reprise the current market chart:

You'll see in red text the relationships I teased you with in the previous essay.  A couple are "duh aha's" that any semi mathematic observer can ferret out.  For example, the first red "aha" is CE divided by CD is equal to two.  Well, not so much because it is equal to 2.07 to be more accurate.  I give that a teaser "aha."  A little closer is AC / AB = 1.98.  

What's the big deal about PTVs having a relationship in magnitude of 2?  Its the root 2 growth spiral in nature.  A biologic cell at it base level divides itself into exactly two parts.  A 1X1 square divides itself by replicating its 1.414 hypotenuse to form a square with sides of 1.414 and exactly twice the area of the 1X1 square; that being 2.  That 1.414X1.414 square; what's its hypotenuse?  It is sqrt(1.414^2 + 1.414^2) got 2.  Finding vectors relationships to one another of 2 implies the root 2 growth spiral is as Mr. Gann might say "at work in the market."

Now lets use some averaging to sniff out some structural relations.  Its very disappointing that the supposed square ABCD has sides, none of which are equal.  And the diagonals aren't equal nor doe either of them extrapolate from any given side that would indicate squareness of the sides.  Go to the fourth of the four red "aha's" above.  You are summing the diagonals of BC and AD and dividing by the sum of the four sides.  The math:

That's one of the first "aha's" that told me I was on the right track towards confirming the market struct that Mr. Cowan asserted must be present.  The average of the two diagonals divided by the four sides is 1.4068, comfortably close to the relation of the hypotenuse of the 1X1 square to one side or 1.414 (root 2).  It worked kinda like I thought it must work according to the perhaps the grandfather of all laws; the Pythagorean 345 triangle and the calculation of it hypotenuse.

Do you understand the importance of the above?  Its not like, "wow, price hit the Phi retrace and reverse" when it happens 1 out of 10 times or 1 out of five or its hits one of the several Phi levels.  The proposition was, if ABCD is actually a square in a tangled, twisted perspective view that defies the limitations of what we can visually interpret, then its diagonals must relate to the sides by 1.414.  It couldn't be otherwise...and was not.

So why are the sides not equal?  Well, we know they never (well, pretty much never) are in the market.  Having already worked out many of the 90, or whatever, unique vectorial relations, I know the difference is the many growth spirals that are simultaneously occurring.  I've seen enough to know, those four sides of the supposed ABCD square are mathematically related, by some permutation of a growth spiral or market metric, to each other and every one of the other 9 real vectors.  It's law.


Do you see where I am going?  If the four points and associated vectors of square ABCD are mathematically related to those four vectors that connect them to hypothetical point E (e.g. PTVs AE, CE, BE and DE), well, point E is mathematically determined.... it is determinable.

If you caught the "*" notation of the previous essay, point E in three dimensional space can be predicted from three fixed points.  You know, all the action movies have the detective asking the cellular folks to "triangulate" the bad guys cell phone.  In two dimensions, you only need two points and a vector of fixed magnitude.  With those givens, point E can be determined from PTV AE and AD or from PTV BE and AD or from PTV CE and AE.....  And all of those PTVs' magnitude are mathematically determinable from points ABC and D.

Once the low of March 2009 occurred, the die was cast for Point E; both time and price.

No, I have not worked them all out nor have I codified how the growth spirals will work to create a model of the structure.  There's a lot of work yet to done in this laboratory.

Next up, I'll go over some simple "aha's" and implication.  Further down the road, I'll take point A and look at the mathematic relations between the four vectors that radiate from it; AE, AC, AD and AB.  That's where I suspect we will first begin to codify the structure of price/time.

What is the cause and what is the mathematically consequent effect?

Jim Ross

1 comment:

  1. I really love reading your stuff Jim! keep up the great work