Market Math

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

My prediction of March 15th was, indeed, a stinking failure. Today, the nearby contract closed at 50.49.

The "event" which was the 2-sigma breakout only lasted 4 days, rather than the 20 or so that had happened in previous rallies.

However, undeterred, I am now ready to make another prediction based on the following observations of the last 10 years of data.

In 6 out of the last 10 years, the price of the nearby contract has increased between April 15th and May 15th. In only one of the years of decrease, 1996, has the decrease been substantial (15%) The rest of the time, there has either minimal change or an increase. The average increase in oil price between April 15th and May 15th has been about 3% but if you throw out the 1996 outlier, the average is about 5.2%

Also, in 6 of the last 10 years, the price of oil declined or stayed close to even in the period between March 15th and April 15th. In years in which this happened, there was a big rally between April 15th and May 15th in every case. In the most extreme case, this rally was 17%. The average of these incidences was 12%.

Therefore my official prediction is as follows: On May 15th, the NYMEX nearby contract crude oil price will be between 53.11 and 56.54 (5.2% and 12% increases respectively).

By the way, the average price change for the first 10 days of this period (Apr 15-May 1) has been zero, so we can expect most of the action to happen between May 1 and May 15.

Note that I am being a good sport and making a relatively narrow prediction band. Those weasels from the US-EIA the other day made a price prediction band of +- 2 sigma, so with sigma being about 4 points because of the volatility, this is nearly a +-8 point prediction. Although this is statistically rigorous, and ensures a 90% probability of a successful prediction, it is no fun so I am not going to do it.

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

Well, my May oil price prediction was somewhat better than the original fibonacci-driven prediction of April, so maybe we are onto something with this seasonality.

The market closed at 49.60 on Friday, which is well below my 53.11 prediction, however, it may be that this year, the seasonality is a bit off (about one month early). Explaination: Usually in the spring, the March/April time frame, there is an increase in the oil price as refineries get into their purchasing patterns to build up supply for driving season, which starts in June. This jump up in price is typically followed by a price decline, which is normally reflected in the May-June numbers. Here is what I mean: Over the last 22 years, the price of oil has decreased 14 times during the period between May 15 and June 15, compared to only 8 increases. The average of all of this is a net 3.6% decrease. This "post spike" price decline that happens after the spring rush is sometimes pretty severe. In 1998, there was a 21% decrease in oil price during this period. In 1994, the spike happened a little late, and there was actually a 12% increase in oil prices during that time.

Between June 15 and July 15, over the last 22 years, there have been 13 increases and 8 decreases, an average of 3% increase give or take.

So, my new theory is that the seasonal spike was a month early (between March and April). We had the post-rush price decline last month, and therefore the pricing pattern for the next month will be the same as the normal pricing pattern for June 15 to July 15, which is an average 3% increase. In years in which the oil price increased during this period, the average increase was 6.8%, so that's my top limit.

Therefore my official prediction is as follows: The oil price is one month early in the seasonality pattern and will increase between 3.0 and 6.8% in the next month. This will make the price between 51.09 and 53.07.

Starting in June, I will begin to monitor the water surface temperature off of Key West, Florida, and predict a price increase when this temperature gets high enough for hurricanes to start to form in the Gulf of Mexico(about 85F). Also, if the seasonality this year is one month early, we can expect the price to increase probably in mid-September for the heating-oil seasonality in the fall, instead of October like it normally does. If these two events happen at the same time, we will see an interesting market event.

0mar · **Posted:** Wed May 18, 2005 11:20 am

shudder I hate math

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

My prediction of last month has proved to be off, oil closed at 56.70 on the 15th, but the comments above on seasonality proved to be correct, so I do not feel too bad for being conservative.

The next month seasonality: The normal seasonality between June 15 and July 15 is an increase of 3%, and also, the normal seasonality between July 15 and August 15 is an increase of 3%.

So, if we are to believe the seasonality, and that the market is about a month ahead of where it normally is, we could expect the same magnitude increase between June 15 and July 15 as we got last month.

Therefore my official prediction is as follows:

the price change in oil will be the same as it was last month, which is 13%. So, the price on July 15th will be 63.58 +-2.

By the way, I believe this market is really nervous right now, what with the heating oil issue, possible storms in the gulf, and all of that stuff going on in the mideast, plus some air conditioning issues in the northeast US, so there is no telling what a bunch of traders on some exchange floor somewhere might do on a given day. I will stop short of calling for a market blowup, but you never know what will happen.......

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

fibbonacci update:

The market has encountered another "event", defined earlier by me, which is an exceeding of the 100-day moving average by more than 2 times the standard deviation (2-sigma). The "event" actually started on the 17th. If the market closes below 59.20 in the next day or two it's over, but this number will change depending on how the price changes.

The previous fibbonacci event started 66 days ago, and ended 63 days ago, and did not amount to squat, price-wise, and only lasted 4 days.

However, the previous two fibbonacci events lasted for about 20 days and resulted in a price increase of an average 13%. So, do not be surprised if two weeks from now, the price is around 66.00.

Also, the current price spike situation is: the 20-day price spike is about 18%, and the 100 and 200-day price spikes have been about 28 and 36% respectively, so not in the realm of "oil shock" level yet.

EnviroEngr · **Posted:** Sat Jul 16, 2005 1:58 pm

... cleaning up my Outlook box:
... from INO, we have:

Fibonacci Number Series

The work in mathematics by a thirteenth century Italian has had a profound impact on modern man and has yielded a useful technical analysis tool. Born Leonardo of Piza, he is better known in the trading community as Fibonacci. Fibonacci's best known work is Liber Abaci which is generally credited as having introduced the Arabic number system which we use today.
Fibonacci introduced a number sequence in Liber Abaci which is said to be a reflection of human nature. The series is as follows:

1,1,2,3,5,8,13,21,34,55,89,144 and on to infinity. The series is arrived at by adding each number to the previous. For example, 1 plus 1 equals 2; 2 plus 1 equals 3; 3 plus 2 equals 5; 5 plus 3 equals 8; 8 plus 5 equals 13; and so on.

I use the Fibonacci series in a number of ways, in terms of both time and price movement. I will briefly discuss some basic time movements.

Never miss a major market move again

The 13-week pattern in hogs is the simplest application of finding market turns based on a Fibonacci number. Markets will often turn on a time span which is a Fibonacci count from a previous important event. For example, look at the monthly cattle chart to see several turns on or about 21 months from a previous high or low.

Time counts can be done on virtually any type of chart. The turns can be counted in terms of days, weeks, months or even years. I have found weekly counts to be the most practical and very effective.

Another powerful method is to look for areas where Fibonacci time counts from various previous lows and highs converge.

In analyzing price action, the simplest way to use Fibonacci numbers (1,1,2,3,5,8,13,21,34,55,89,144...) is on support and resistance levels or pivot levels. For example: 5.00 and 8.00 soybeans, 5.50 (55) soybeans, 3.00 corn, 500 gold, 5.00 silver, 1.44 oats, 34.00 hogs, 55.00 cattle, and so on.

Lengths of moves in terms of price commonly are a Fibonacci number. The downmove on the weekly crude oil chart was $22, which was followed by a $13 rally. Livestock commonly move in increments of $5, $8 or $13. Grains like to move in 8<);, 13

The most common application of Fibonacci numbers is the use of ratios within the number series. Many people do not realize that the common retracement levels are derivatives of Fibonacci relationships. Fifty percent is 1 - 2, 66 is 2 - 3 and thereafter, any number in the series divided by the next results in 62 . Also, starting with 3, any number divided by the second number following it will result in 38 (3 - 8, 5 - 13, etc.).

For a more complete discussion of Fibonacci relationships, see chapter 4 of Elliott Wave Principle, by Frost and Prechter.

Here is an example of how well you can do with not a lot of money.

Two weeks ago we showed you the results below. You might still have this in your email in-box. At that time we had no idea, nor did anyone else of what the future might bring.

We thought you might like to see an update of how we did.

The results since the first of the year are based on one futures contract, no pyramiding. Results do not include commissions or slippage.

2005 May Crude Oil:
01/04 Buy 43.55
01/20 Sell 47.20 Gain $3,360.00
01/21 Buy 48.55 Loss $1,350.00
01/28 Sell 48.25 Loss $300.00
02/10 Buy 47.20 Gain $1,050.00
03/22 Sell 56.60 Gain $9,400.00
Current price 53.81 Open Gain $2,790.00

Total gains since 1/04/05 based on one May 2005 Crude Oil contract $15,240.00.

UPDATE: Two more signals tack on an additional $4,550 in closed out profits, plus an additional $900 in open profits. Grand total $20,690.00

---------------------------------------------------------------------------

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{checking this out, will highlight the functionality of the program once I understand it.}

seahorse · **Posted:** Sun Jul 17, 2005 5:12 pm

Put this to the real test and see if your Fibonacci system can predict the price of gas at the end of this year and win the $1,000.00. Post your prediction here.

EnviroEngr · **Posted:** Mon Jul 18, 2005 3:41 pm

Pup,

If you hit pay dirt, all I'll ask for is a bottle of Glenlivet.

Mr. seahorse has a capital idea.

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

I think Khebab's 21-day multi-wave cyclical model with an uptrend bias has a good chance at hitting this. That model brilliantly called this recent price retreat.

Since my monthly forecasts based mainly on seasonality have been directionally accurate for the last couple of months, but otherwise pretty mediocre, we should probably try multiple methods.

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

Okay, here is the methodology:

Downloaded the EIA data.

Truncated the data set at September 19, 2003, the start of the current uptrend.

Eliminated the trendline (linear upward bias) of about 19 cents per day by subtracting.

Set up Excel to generate sine curves. I have the frequency (in days), the amplitude, and the "phase shift" as variables, so these can be adjusted to whatever I want.

Set up nine of these curves, to conform to the fibbonacci series. I decided to start at 5 and go up to 233. The "predictive" curve is the sum of the nine sine curves.

Then easy to use MS-solver to do curve fitting to arrive at a set of amplitudes and phase shifts to get as close as possible to the historical curve, then easy to use the same functions to project into the future however far we want. I minimized "standard error" and let it rip. I know, Shiraz and Energyspin will give me a hard time for using MS-solver, but it's just trig functions and adding and subtracting, so should not be too far off.

I did two different sets. The first one, I just let solver do its thing using the fibbonacci series. On that one, I ended up with a standard error of about 10.3. On the second one, I allowed the frequency to float, and the standard error dropped to about 5.3, which is pretty respectable with such a data set.

Once the prediction curve is generated, add back the trendline for the actual forecast.

Discussion:

The forecast for December 30th is 211.49 per hundred gallons. I will submit the answer to the link above and let the chips fall where they may. If I win, I will split the prize four ways: $250 each for Khebab and Enviroengineer, and $250 donation for PO.com.

Here is the data for the nine curves:

Code:

   Freq   Amp   Shift
1   3.716710681   0.219469695   -6.901543162
2   8.705110298   -0.733981844   35.55412622
3   13.08938241   0.993269946   11.76082369
4   21.17713824   1.594923598   6.979206439
5   32.76618331   2.024850264   -29.01277507
6   53.48990161   -4.632279418   -18.77345814
7   103.4276886   203.7600223   38.69041416
8   103.878651   -205.6761178   -64.50614173
9   360.3374282   -13.41983442   122.5313872

Frequency is the number of days from peak to peak. Amplitude is the height of the peak, positive or negative, and shift is the number of days forward or backward the curve shifted.

Note that the frequencies, as floated, are actually pretty close to the fibbonacci series. Curves 7 and 8 are about the same wavelength, and are in opposite directions (cancelling) and the phase shift is such that they are practially self-cancelling so have minimal effect on the sum curve.

You are really going to hate August. According to this model, mid-August will see about 2.07 per gallon. The price will ease up through the fall, and then hit another peak in mid-January, of 225. In the April/May time frame, this is about 233.

This model did a pretty good job of spotting the historical market swings, but is relatively insensitive to the "noise" of the daily market volatility.

Maybe some kind person will post the graph, because I am still too thrifty for my own website, but I must say, it's a classic.

Fun with numbers. Anybody with alternate models are of course welcome to post! Also, moderators, if the data set is too long, feel free to re-do in such a way as to not take up too much space.

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

Code:

day   actual   predicted
1   78.70   77.01
2   80.00   77.86
3   80.95   79.23
4   86.54   80.57
5   87.59   80.98
6   88.74   80.72
7   84.49   80.36
8   88.65   79.56
9   80.51   78.31
10   82.05   77.63
11   85.11   77.95
12   84.27   78.53
13   83.61   79.05
14   83.12   79.92
15   88.15   80.73
16   89.07   80.65
17   87.71   80.02
18   88.96   79.66
19   88.41   79.34
20   87.59   78.63
21   84.94   78.07
22   85.87   77.95
23   84.88   77.49
24   82.13   76.43
25   83.57   75.64
26   83.71   75.41
27   82.84   75.24
28   83.01   75.34
29   83.13   76.35
30   80.04   77.75
31   80.34   78.57
32   78.72   78.99
33   78.40   79.49
34   82.39   79.65
35   81.42   79.35
36   83.31   79.57
37   82.44   80.72
38   84.38   82.04
39   85.42   83.19
40   86.91   84.58
41   89.16   85.82
42   87.00   86.07
43   91.57   85.67
44   90.44   85.47
45   88.08   85.31
46   87.92   84.80
47   83.54   84.51
48   82.36   84.78
49   83.66   84.86
50   82.17   84.46
51   84.18   84.40
52   85.64   84.98
53   85.96   85.65
54   85.13   86.59
55   87.34   88.41
56   86.46   90.58
57   86.73   92.06
58   86.38   92.98
59   90.04   93.77
60   90.28   93.99
61   90.33   93.50
62   91.94   93.29
63   92.72   93.85
64   90.69   94.49
65   87.17   94.93
66   89.08   95.62
67   91.43   96.23
68   91.16   95.93
69   94.97   95.04
70   94.92   94.44
71   97.69   93.97
72   96.55   93.22
73   96.09   92.76
74   99.01   92.89
75   102.37   92.84
76   101.62   92.24
77   99.77   91.86
78   99.09   91.98
79   93.29   92.05
80   99.52   92.23
81   101.62   93.18
82   101.97   94.41
83   105.49   94.96
84   103.65   94.93
85   100.25   94.82
86   98.84   94.26
87   98.68   93.13
88   99.14   92.48
89   98.04   92.89
90   101.73   93.75
91   100.15   94.79
92   98.57   96.48
93   100.58   98.46
94   96.15   99.85
95   96.75   100.87
96   101.05   102.32
97   100.82   103.96
98   100.56   105.32
99   103.24   106.87
100   105.16   108.88
101   104.98   110.52
102   105.69   111.35
103   103.06   112.08
104   102.77   113.01
105   102.44   113.59
106   105.89   114.02
107   107.73   115.01
108   109.50   116.15
109   114.66   116.51
110   114.28   116.23
111   109.57   115.80
112   110.52   114.86
113   112.46   113.32
114   108.35   112.18
115   105.93   112.08
116   107.02   112.41
117   112.03   112.90
118   109.73   113.98
119   113.19   115.32
120   112.64   115.95
121   115.77   116.05
122   115.27   116.39
123   115.55   116.79
124   112.91   116.76
125   114.68   116.82
126   114.64   117.29
127   110.49   117.42
128   112.90   116.79
129   111.84   116.16
130   115.62   115.86
131   112.44   115.43
132   107.59   115.08
133   107.22   115.57
134   105.85   116.54
135   107.34   117.02
136   111.25   117.09
137   115.08   117.21
138   118.03   116.93
139   115.60   116.05
140   115.53   115.53
141   117.88   115.98
142   117.11   116.77
143   116.50   117.61
144   115.84   118.94
145   113.43   120.40
146   118.20   121.07
147   116.46   121.08
148   118.22   121.26
149   120.67   121.48
150   122.68   121.32
151   124.44   121.33
152   124.67   121.94
153   126.20   122.41
154   130.58   122.34
155   131.25   122.47
156   131.20   123.13
157   133.86   123.83
158   129.63   124.73
159   132.23   126.56
160   137.35   128.93
161   140.05   130.80
162   141.01   132.14
163   141.70   133.32
164   138.69   133.85
165   145.03   133.44
166   145.02   133.00
167   141.68   133.16
168   145.78   133.37
169   141.65   133.35
170   141.92   133.59
171   138.52   133.81
172   143.67   133.12
173   135.30   131.67
174   128.23   130.33
175   123.54   129.02
176   117.79   127.36
177   120.14   125.90
178   116.63   125.12
179   116.73   124.29
180   118.81   122.96
181   115.25   121.83
182   115.03   121.23
183   114.62   120.65
184   118.71   120.23
185   119.70   120.70
186   116.15   121.73
187   119.89   122.30
188   120.15   122.37
189   122.19   122.34
190   120.57   121.74
191   114.48   120.31
192   112.43   119.00
193   115.62   118.51
194   122.56   118.36
195   124.44   118.31
196   127.21   118.89
197   127.35   119.85
198   132.78   120.23
199   132.15   120.12
200   130.02   120.33
201   128.53   120.72
202   131.60   120.81
203   132.02   121.10
204   130.05   122.00
205   129.17   122.73
206   124.62   122.76
207   124.28   122.71
208   125.72   122.91
209   127.88   122.84
210   124.67   122.65
211   124.43   123.14
212   129.54   124.05
213   127.52   124.42
214   129.95   124.26
215   128.62   124.00
216   128.66   123.23
217   120.34   121.67
218   124.44   120.28
219   123.47   119.83
220   124.01   119.86
221   123.49   120.13
222   126.22   121.13
223   129.81   122.60
224   134.68   123.54
225   130.45   123.93
226   130.55   124.50
227   129.72   125.11
228   132.36   125.25
229   126.73   125.37
230   125.75   125.91
231   126.03   126.14
232   119.46   125.50
233   116.32   124.66
234   117.69   123.98
235   114.04   123.00
236   112.88   121.92
237   118.90   121.60
238   119.32   121.89
239   120.65   121.84
240   117.92   121.46
241   118.17   121.19
242   122.54   120.57
243   116.42   119.26
244   120.14   118.19
245   124.01   118.09
246   121.42   118.51
247   122.63   119.17
248   127.03   120.57
249   127.45   122.44
250   128.96   123.76
251   134.30   124.49
252   134.32   125.36
253   134.82   126.27
254   134.63   126.73
255   135.79   127.25
256   133.60   128.33
257   134.44   129.27
258   135.22   129.54
259   133.69   129.78
260   136.66   130.38
261   138.75   130.85
262   140.19   131.34
263   141.20   132.69
264   140.50   134.72
265   138.03   136.42
266   140.83   137.69
267   141.96   138.89
268   140.94   139.46
269   135.04   138.98
270   135.73   138.27
271   140.32   138.09
272   141.22   137.98
273   143.76   137.70
274   139.75   137.80
275   141.25   138.09
276   133.61   137.59
277   129.32   136.30
278   131.46   135.03
279   129.08   133.74
280   128.77   132.01
281   132.77   130.40
282   127.74   129.48
283   128.68   128.61
284   127.53   127.24
285   123.39   125.99
286   128.52   125.22
287   124.44   124.42
288   125.69   123.71
289   123.79   123.91
290   122.20   124.84
291   125.60   125.50
292   123.83   125.75
293   131.09   125.91
294   128.94   125.46
295   130.63   123.93
296   129.57   122.16
297   130.29   120.94
298   126.40   119.92
299   120.12   118.89
300   114.14   118.46
301   113.49   118.50
302   112.96   118.06
303   108.67   117.08
304   108.75   116.36
305   111.13   115.84
306   107.99   115.07
307   110.12   114.54
308   110.99   114.80
309   116.17   115.17
310   113.78   115.04
311   119.01   114.93
312   115.22   115.20
313   116.69   115.31
314   114.56   115.35
315   112.93   116.16
316   104.12   117.66
317   104.57   118.87
318   108.43   119.68
319   108.87   120.47
320   113.17   120.74
321   117.21   120.02
322   117.10   119.15
323   122.29   118.98
324   121.42   119.16
325   120.84   119.51
326   121.04   120.61
327   121.85   122.32
328   125.46   123.62
329   127.61   124.36
330   126.19   125.25
331   126.32   126.18
332   125.76   126.61
333   129.96   126.99
334   129.90   127.86
335   134.45   128.55
336   135.93   128.42
337   135.19   128.02
338   130.82   127.72
339   131.77   127.05
340   131.45   126.16
341   129.35   125.99
342   126.84   126.55
343   126.05   126.96
344   121.22   127.17
345   121.62   127.58
346   123.74   127.72
347   129.49   127.10
348   128.37   126.51
349   127.80   126.80
350   125.64   127.63
351   128.28   128.78
352   123.65   130.80
353   126.34   133.55
354   130.89   135.95
355   131.14   137.81
356   128.38   139.77
357   125.45   141.73
358   124.56   143.13
359   140.27   144.43
360   148.38   146.21
361   150.75   147.83
362   150.89   148.68
363   150.53   149.27
364   153.53   150.03
365   153.29   150.49
366   148.31   150.74
367   151.75   151.75
368   150.65   153.54
369   150.73   155.21
370   154.83   156.62
371   156.16   158.12
372   157.55   159.18
373   159.56   159.19
374   157.49   158.87
375   157.49   159.03
376   159.92   159.35
377   157.27   159.59
378   157.30   160.33
379   159.61   161.52
380   165.49   162.12
381   173.10   161.94
382   172.16   161.71
383   168.80   161.38
384   165.92   160.48
385   156.80   159.51
386   153.66   159.13
387   154.98   158.78
388   153.38   157.84
389   148.43   156.82
390   150.41   156.12
391   148.38   155.25
392   149.44   154.26
393   157.01   154.06
394   158.13   154.68
395   162.00   155.19
396   165.23   155.39
397   165.07   155.61
398   162.51   155.27
399   154.19   153.74
400   154.90   151.71
401   149.33   150.02
402   151.45   148.43
403   145.94   146.76
404   146.64   145.69
405   147.92   145.23
406   147.60   144.44
407   148.73   143.15
408   151.03   142.10
409   148.20   141.29
410   143.20   140.24
411   141.22   139.43
412   140.52   139.54
413   143.52   139.99
414   141.44   140.09
415   143.64   140.30
416   141.91   140.96
417   139.85   141.52
418   142.67   141.97
419   145.17   143.20
420   144.78   145.27
421   147.53   147.25
422   146.94   148.94
423   154.42   150.68
424   151.54   151.91
425   155.71   151.98
426   152.95   151.55
427   151.57   151.51
428   149.75   151.63
429   157.14   151.75
430   154.36   152.56
431   155.42   154.08
432   154.09   155.35
433   156.25   156.10
434   159.78   157.01
435   164.71   158.03
436   164.56   158.60
437   162.74   159.16
438   161.25   160.34
439   165.67   161.57
440   165.57   162.14
441   167.50   162.48
442   162.48   162.97
443   158.45   163.09
444   157.21   162.87
445   164.85   163.30
446   168.18   164.53
447   178.99   165.76
448   180.56   166.85
449   176.34   168.21
450   173.21   169.32
451   177.54   169.53
452   175.42   169.48
453   169.35   170.05
454   168.83   171.01
455   164.73   172.17
456   167.35   174.17
457      177.04
458      179.72
459      181.89
460      184.12
461      186.33
462      187.93
463      189.30
464      191.10
465      192.80
466      193.71
467      194.26
468      194.86
469      195.03
470      194.83
471      195.26
472      196.54
473      197.91
474      199.20
475      200.81
476      202.18
477      202.59
478      202.57
479      202.97
480      203.53
481      204.03
482      205.10
483      206.80
484      208.09
485      208.63
486      209.03
487      209.22
488      208.66
489      207.78
490      207.31
491      206.78
492      205.52
493      203.97
494      202.55
495      200.77
496      198.62
497      197.10
498      196.45
499      195.85
500      195.13
501      194.63
502      193.79
503      191.82
504      189.24
505      186.89
506      184.59
507      182.17
508      180.35
509      179.31
510      178.12
511      176.48
512      175.04
513      173.83
514      172.32
515      170.95
516      170.47
517      170.45
518      170.14
519      169.92
520      170.14
521      170.24
522      170.12
523      170.69
524      172.17
525      173.73
526      175.15
527      176.76
528      177.98
529      178.00
530      177.29
531      176.73
532      176.18
533      175.48
534      175.41
535      176.20
536      176.92
537      177.25
538      177.82
539      178.61
540      179.06
541      179.54
542      180.77
543      182.32
544      183.40
545      184.34
546      185.48
547      186.27
548      186.60
549      187.40
550      189.01
551      190.66
552      192.18
553      193.99
554      195.55
555      196.06
556      195.97
557      196.17
558      196.51
559      196.83
560      197.87
561      199.84
562      201.80
563      203.33
564      204.97
565      206.67
566      207.80
567      208.68
568      210.05
569      211.49

EnviroEngr · **Posted:** Thu Jul 21, 2005 9:16 pm

First:

"The forecast for December 30th is 211.49 per hundred gallons. I will submit the answer to the link above and let the chips fall where they may. If I win, I will split the prize four ways: $250 each for Khebab and Enviroengineer, and $250 donation for PO.com."

Can't argue with that. I'll start looking for 18 and 21 year Scotch then. Macallan and Aberlour Single Malts should fit the bill. Remember, the 211.49 has to be in NYMEX dollars, not dispenser (at the pump) dollars.

Then there's:

"Fun with numbers. Anybody with alternate models are of course welcome to post! Also, moderators, if the data set is too long, feel free to re-do in such a way as to not take up too much space."

This moderator says 'leave it alone'. If bandwidth is an issue, let's talk.

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

Quote:

Remember, the 211.49 has to be in NYMEX dollars, not dispenser (at the pump) dollars.

Correct. Wholesale dollars.

Quote:

'leave it alone'. If bandwidth is an issue, let's talk

Cool.

MrBill · **Posted:** Wed Sep 21, 2005 2:09 am

I have been trading commodities like grains & oilseeds and oil & gas, plus things like FX for about 20-years now. I have always been a technical trader for identifying entry & exit points, although I try to have at least an informed opinion about the underlying fundamentals. Unfortunately, the underlying fundamentals are always quite slow to drive markets.

Take this week in crude oil. The market was in a down trend as of Friday night bottoming at $63.27 (Nov WTI). Over the weekend, tropical storm Rita reared her ugly head (sorry ma'am) and oil spiked 7% to $67.70 while gasoline went up 14%. Less than 24-hours later, tropical storm Rita was upgraded to a hurricane and oil retreated 0.618 (a fibonacchi number like 0.382/0.500) to $64.95. Where it promptly stopped and is now re-testing the high of 67.70 on an upgrade of Rita to a likely category 4 hurricane.

Underlying fundamentals did not change that quickly, but perceptions of risk did. However, unless you are just born lucky, you need a feedback mechanism to tell you when you are on the right side of a move or not. Various technicals tell me if I should cut & run or hold out until the next price point.

It is not a science, but a tool, which academics always fail to understand. At every price point there is a 50/50 chance that the next price will be either higher or lower. So at every point there is a buyer and a seller. One of them makes money at that price point, one of them loses money at that level. When the market returns to that price point, say a major reversal or support line, one investor had good luck buying at that level, while one investor had bad luck selling at that point. That creates a price bias which is self-reinforcing. Technical analysis is in fact behavioral finance versus supply & demand, which is efficient market theory.

Now, of course, recent events have more of an effect on the market than distant events in the past. However, the market does exhibit memory. When you are in new territory and there are price points around for guidance, sometimes you have to look back at weekly, montly, quarterly trends to get a feel for 'is this price too high, too low, or just in an established range?'

Someone who trades soley on fundamentals could simply decide that based on his data that oil should be worth no more than $30 a barrel and find many facts to support their assumption. That person would be seriously losing money at $60-65-70 if they held on to their fundamental belief.

Is $70.85 the high point for 2005 or even 2006? I don't have an opinion, but using technical analysis I will probably sell ahead of $70.85 and hope it goes down, and if not, I will likely go long if we get a sustained break above that level. It is just a tool. As we say, a technical support/resistance line or fibinacchi retracement level is only valid until it breaks. But, if you watch markets 10-12 hours a day for 20-years, you would be surprised at how often they stop at these key levels.

pup55 · **Joined:** Wed May 26, 2004 12:00 am **Posts:** 4447

I am still trying to look at this objectively, but at some point, if enough people do it, this sort of analysis becomes kind of self-fulfilling....The fact that many traders are plugged into it makes it true, and you have to kind of be aware of this stuff in order to try to predict where the market is going to go when it approaches one of these fibbonacci levels.

At the end of the day this is an emotional decision.

By the way, unless the market goes crazy because of rita, the unleaded gas model above has been working to near perfection. It was accurate in calling for the peak at or around sept 1, and pullback afterward. I'm afraid this hurricane will torch it, though.

I still am expecting to fatten up on Dec. 30 when nymex unleaded is exactly 211.45

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