The 11 October 2007 Secondary Equity High: Observing a Gap Peak Day for the Global Equity Marker: The Wilshire on Monday 12 April 2010
The science of saturation macroeconomics is decidedly different from the traditional approach to macroeconomics by academia which looks at vast amounts of trending data and attempts to characterize the predictive trends within the system. The science of saturation macroeconomics attaches little significance the concurrent economic news noise published primarily by large financial interests.
All of the global macroeconomic activity and important macroeconomic determining relationships: outstanding debt, debt expansion, debt liquidation, hard asset price growth and overvaluation relative to wages, hard asset supply, employment level and total jobs and wages based largely in a forward consumption based economy on further debt expansion and money growth, total ongoing entitlement payments, private sector and state and local government solvency, total macroeconomic weal value of real estate, money, money equivalents, and electronic derivatives(including stock's asset net worth) - all of the interrelationships of the operative elements of the macroeconomy are integrated into deterministic, self organizing rotational quantum fractal asset valuation saturation curves.
All who can see a long term chart of composite equities, commodities, and debt instruments, can easily observe the long term yearly and monthly equity, commodity, and debt instrument curvilinear valuation Gompertz saturation curves with periodic nonlinear declines. Magnifying the yearly and monthly patterns and observing the shorter intervals of weeks and days the same quantum patterns are again evident. And further magnifying to even shorter intervals of hours and minute trading periods, the same patterns are again easily visualized. The quantum periodicity, the nonlinearity. and the recurrent proportionality at various orders of time magnitude characterize the nature of fractals.
Lowering interest rates to levels which do not control malinvestment causes asset bubbles. Even with asset bubbles there are rotational limits to malinvestment. The quantum fractal curvilinear valuation saturation curves point the way and define the periodic limits of these debt dependent and interest rate asset bubbles as profits at trading saturation areas are rotationally invested into debt instruments driving both long term interest rates and short term interest rates lower. The x/2x-2.5x/2x saturation 3 phase saturation growth pattern with extension to x/2.5x/2.5x dependent on the operative interest rate is easily identifiable in TYX and TNX as 12/29/28 of 29 weeks. The 12/29/29 week fractal for long term US debt instruments represents a natural boundary for further gains in the equity and commodity markets and defines a naturally rotational turning point.
All of the global commodity and equity weekly and monthly saturation curves of the last two years are operating in a macroeconomic system that is contracting as a result of money supply implosion from a devaluating and yet currently very overvalued household and commercial real estate market. Global real estate market valuations are disconnected from wages and for commercial real estate, from business sales and profits dependent on further household debt expansion. States and local governments which cannot print money and are dependent on individual private sector income taxes, property and sales taxes can not maintain the level of state and local government employees and pension payments. These agencies must contract their employment in this asset overvaluation bad debt liquidation real operative economy.
All of the last two years' smooth curvilinear quantum fractal commodity and equity saturation curves are a summation of investment of available money under the above conditions.
The NIKKEI valuation saturation curve is the best global indicator of future developments. The Nikkei's 20 year valuation curve has been operating under the conditions of near zero percent interest rates and the highest cumulative GDP percentage governmental deficit spending of any industrialized country.
Long term fractal analysis shows an exquisite 20 year monthly quantum decay pattern that is evolving and exactly represents the totality of 1989-1990 scenario of extreme property-equity overvaluation related to massive private debt expansion and a government-banking 20 year collaboration in preserving as much as possible those private debt obligations by embarking on a near zero interest rate policy and massive government spending.
The second fractal of the NIKKEI's equity valuation decay pattern ended in 2003 and its third decay pattern simultaneously commenced. The final third decay fractal is likely composed of a 25-26/60 of 61-64/64 month fractal with a valuation low of the 61-64 second fractal significantly below the 2009 low. The terminal portion of 61-64 month second fractal is represented by 40-49 week nonlinear 2x-2.5x area of a 19-20/40 of 40-49 week first and second fractal series.
The Wilshire is following a 34/84/80 of 84-87 week decay fractal series: y/2.5y/2.5y. The last 80 weeks have been composed of a 7/17/19 curvilinear fractal and taking the third fractal as a base a 19/40 week first and and second fractal. The week of 12 April represents the 80th week of the 34/84/84-87 decay fractal.
The positive growth of the Wilshire's 19 week third fractal of the 7/17/19 week series was enhanced by the market distortion competitive buying of US Treasuries by the US Central Bank.
The CRB is following a qualitatively very similar weekly fractal series and Gompertz curve to the Wilshire: a19-20/40 first and second fractal series :: x/2x with a nonlinear decay expected between week 41-49, As available speculative investment money supports both commodities and equities, there is an understandable logic of the qualitative similar fractal patterns.
Gold, which has the most exquisite yearly and monthly long term fractal pattern since 1968-1970 is following a short term 25-26/53 week fractal with second fractal nonlinearity expected between weeks 53 and 63 and within the terminal portion of a longer 18/43 of 36-45 month first and second monthly fractal pattern and with expected nonlinearity between 43-45 months. It currently has a 50-52 month base with an incipient initiating fractal of 21 months. The US dollar valuation high of 1-3 December 2009 is likely to be decade high as the 50-52/ 125-130 month first and second fractal is completed during a period of of economic contraction, real estate devaluation, and collapse of state and local revenues and related employment.
What then is the predicted final day of valuation growth for the Wilshire's current operative 19/40 week first and second fractal series? The last ten weeks definitely represents a final rapid 'blow-off' growth period reaching to the time dependent Gompertz curvilinear saturation upper boundary defined by the continuation of imaginable line defining the upper valuation boundaries of the 19-20 week first fractal and the second fractal composed of two subfractals: a 6/12/14 week fractal and the current 10 week fractal.
The ten week blow off period may again represent unfortunate malinvestment of retirees on fixed income and savings who are being forced into the equity market because of the prevailing low interest rates. The Federal Reserve's purchase of short term Treasuries has either created interest rates lower than the debt market would naturally yield or alternatively supported equity prices in a relatively massive way considering the total amount of private investment in the equity market vice treasury market over the preceding year. Regardless of the Federal Reserve's intent, its intervention have distorted the markets favoring speculation in the debt markets and disadvantaging savers who are 'forced' to enter the equity market because of the disproportionate returns on investment.
The Wilshire's recent ten weeks valuation growth is defined by two sequential quantum blow-off daily three phase quantum fractal growth sequences with bases of 6 days and 4 days respectively. .The second three phase sequence begins in the terminal portion of the first three phase sequence.
The ten week blow off for the Wilshire is composed of a 6/14/13 day fractal where 1st and 14th day of the second fractal are not captured by an underlying slope line - indicative of a speculative asset blow -off. The last 4 days of the 13 day third fractal form the first fractal base of a final 4/8/7 of 8 final secondary blow-off fractal which would end on Monday 12 April 2010. (The NIKKEI is following a similar 4/8/7 of 8 day fractal)
The last 7-8 days of this 4/8/8 day growth blow-off fractal is composed of a 14/28/15 of 22-28 hour :: x/2x/1.6-2x hourly fractal.
A final high on Monday 12 April with an opening gap at the beginning of the trading day to a new 2 year and ideally with a close at the low of the trading range on either Monday or Tuesday would provide a technical signal that this represents the 11 October 2007 major secondary high before mathematical synchronized second fractal nonlinear collapses with first fractal bases of 70 years, 9 years, 46 months, 26 months, and 19 weeks ending in 1858, 1990. 2002, 2005, and July 2009 respectively.