Ivan Kitov's  Instablog

Ivan Kitov
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I am a Doctor of Physics and Mathematics, Lead Researcher at the Institute for the Geospheres' Dynamics, Russian Academy of Sciences. Founding member of the Society for the Study of Economic Inequality Published three monographs in economics and finances: Deterministic mechanics of pricing... More
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Stock Market Science
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Economics as Classical Mechanics
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Deterministic mechanics of pricing
  • Time To Buy SPY 5 comments
    May 23, 2012 7:06 AM

    A month ago, we predicted a drop in the S&P 500 to the level of 1300 by the end of May. Figure 1 shows the predicted behavior in April and May 2012, with the predicted segment shown by red line. We expected that the path observed in the previous rally would be repeated with the bottom points coinciding. Now the prediction has realized and the expected level has been reached. (There is some room for a slight fall.)

    We also suggested buying the index when it is 1300. It's done by now. We are waiting the level 1500 in October 2013 to sell.

    We also expect oil price to drop further and to force deflation by the end of 2012.

    (click to enlarge)

    Figure 1. The original S&P 500 curve (black line) and that shifted forward to match the 2009 trough (blue line). Red line - expected fall in the S&P 500: from 1400 in March to 1300 in May. It's been realized by now.

    Disclosure: I am long SPY.

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Comments (5)
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  • flash9
    , contributor
    Comments (3752) | Send Message
    Ivan, what happened to the bear mkt and deflation you use to predict?
    23 May 2012, 09:22 AM Reply Like
  • Ivan Kitov
    , contributor
    Comments (211) | Send Message
    Author’s reply » Deflation is coming - oil falls and drives prices down. Formal deflation in 2012 will be clear in the GDP deflator
    Real economic growth is suppressed - might be around 1%.
    S&P 500 will be slowly growing to 1500 by the end of 2013. It does not grow much in 2012.
    24 May 2012, 03:32 AM Reply Like
  • Ivan Kitov
    , contributor
    Comments (211) | Send Message
    Author’s reply » I also have to admit that the model based on the number of 9-year-olds does not work well. The 2010 census has shown why. The Census Bureau severely suppresses actual changes in population cohorts and no true changes can be recovered. Therefore, the model failure is partly due to artificiality of population data.
    24 May 2012, 04:01 AM Reply Like
  • finolabrain@gmail.com
    , contributor
    Comments (3) | Send Message
    I am surprised with your prediction - as it would seem counter-intuitive to me that the oil price per barrel would drop - given the following world events : disclosure by the Saudis that they actually have far less oil than was originally cited years ago to OPEC ; current pressures on oil supply and the arrival at peak oil years ago ; the threats to the Saudi oil fields posed by the large multitudes of Shia moslems (a million who live right ON the oilfields and are at odds with the prevailing sunna goverment (who are aligned with the US ). The current threats towards Iran by the US (via Israel) pose a massive threat to the world economy and stability - not only because Iran is the second largest oil supplier when compared to the largest (Saudi ) but also because of what this might trigger with the Shia in Saudi on the oilfields. It happened last year when i was told that the government executed some Shias for an attack on the oilfields . I fear what they might do when they perceive American (and Saudi ) aggression toward s the Shia in Iran - and how that could play out badly .
    I read somewhere that when Libyan oil went offline via the embargos etc - the price of oil rose 50 dollars a barrel - and Libya only produced 6 percent of the worlds supply ! If Saudi is currently the largest supplier ( producing 20 percent of all the oil we are so dependent on - ) - what do you expect will happen to prices then ? If theres any proportionality (and do correct me if this is wrong ) that could bring us to 300 dollars per barrel !!
    Already the Baltic Dry Index descent shows that shipping and trade are around the world is perilously placed - with old British shipping companies in the biz for 300 years going belly-up ( excuse the pun ) A further increase in oil prices will not just stop us all taking out our pleasure craft - but will stop all nations from trading at all ! 300 a barrel would be crippling to airlines, factories , shipping , trucking, manufacturing , auto sales and even the daily bus route for mr joe average. ! What then ? This war is massively important to Loughheed- Martin , Embraer, and all the arms deals that have just been pushed through in the last 24 hours! (check out on Reuters ) . When - not if - Romney gets elected ( his family does own the voting ballot counting machines after all - and they DID contribute massive sums of cash to his campaign directly- I guess somehow thats not a conflict of interest !! ) the war machine will proceed - as there are deals were just struck today with the UAE and QATAR today and i wonder who else is shopping for so - called protection and stealth etc.... What does one do with a million aggrieved people who feel threatened because they are moslem and living right where they are not wanted ?
    6 Nov 2012, 07:31 AM Reply Like
  • Ivan Kitov
    , contributor
    Comments (211) | Send Message
    Author’s reply » this post is from May 2012. A similar post http://seekingalpha.co... was a week ago and showed that we were righ with the S&P 500.
    We predicted the turn in oil price in 2008, when it did not reach the peak yet. In May, we had the same long-term view and expected the price to fall. However, we always stress that oil price is highly volatile and may fluctuate around the long term trend that aloows for additional profit - http://seekingalpha.co...
    Currently, it is definitely on a downward short-term trend. It is not the best time to buy stocks with a positive link to oil price.
    6 Nov 2012, 10:08 AM Reply Like
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