Friday, February 20, 2015

2015.02.20 Gold Cycle Model Chart

2015.02.20 Gold Cycle Model Chart


















The gold model Z-score increased to 2.4 from the previous iteration. This suggests increasing pressure for a reversal to the mean, in this case a rise towards the $1300 level. A reader asked how to interpret the Z-score, and in answer I have also posted a long term model ranging from 1968 to 2016.

















If you click on the chart to get the higher resolution graphic, you will see that on a historical basis the Z-score has been >3 about a dozen times, out of 11909 data points in the time series.   This is why in my last gold cycle model chart update I mentioned that it was unlikely that the model would breach a Z-score of 3. For convenience, I will also add the model to the long term chart section.   However, it also becomes more likely that the model might fail to converge unexpectedly and annoyingly. According to the cycle model, we seem to be at a major turning point for gold, so we are in the "make or break" time for the model.  Hence, I will try to keep weekly updates current.

Sunday, February 15, 2015

2015.02.13 VIX Cycle Model Chart

2015.02.13 VIX Cycle Model Chart


















The VIX cycle model suggests continued upward pressure on VIX, especially given the current Z-score of 3.4. The usual caveat is that this model is useful for estimating longer term direction rather than day-to-day swings in price.  Back in August of 2014, the VIX cycle model suggested a gradual rise into 2015. The timing was more accurately predicted than the price levels. That model run is on the blog and also shown below.  The difference between the actual and predicted is an important input into a neural net model I use, since it contains the cyclical information, but there are other factors used in the neural net model that clearly influence short term behavior which cannot be captured by cyclical analysis.


2014.08.01 VIX Cycle Model Chart