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9/04/2005
Velocities & Distance, by Victor Niederhoffer

Several interrelated aspects of the distance the market has covered in short and long time intervals seem somewhat non-random and possibly predictive to me now. We’re at 1220-ish in the S&P, exactly where we were two weeks ago, six weeks ago and eight weeks ago. We've had some seemingly bad news in the last two months that most of us would have predicted would have left the market 5% to 10% lower with all the manmade and natural destruction and the price of oil above $70 a barrel. Yet -- such is life -- we have not given ground. I note a seemingly inordinate number of sudden jumps in price, such as the 15-point rise from 2 p.m. to close on Aug. 31; the 10-point drop starting 9:30 a.m. on Aug. 22, the 10-point decline starting at noon on Aug. 24, and the 10-point rise starting at 9:30 on Aug. 26.

It's so much easier to describe these things than predict, but without concentrating unduly on the meals for a day rather than the meals for a lifetime, our hallmark -- a hallmark, I might say, responsible for the somewhat elegant and uplifting aura that pervades our backdrop -- and without interfering with the terra firm of the Professor of Non-Predictive Studies, I propose a simple measure.

As of a given time, what is the maximum and minimum distance it's covered (above or below), say in the previous month, and is this nonrandom or predictive? For example, on Aug. 31, the close at 1221.4 was 27 below the Aug. 3 close of 1248 and 15 above the Aug. 26 close of 1206.

Here's a table:
          END OF        Price   Distance Below  Time   Distance Above  Time
                                Maximum                Minimum
           Aug          1221       27            28         15          6
           July         1237       10             1         38         25
           June         1196       25             9          0          0
           May          1197        4             2         28         29
           April        1163       37            20         19          6
           March        1184       30            28         14          2
           Feb          1208       08             4         14         28
           Jan          1186       24            27         16          7

The current price of 1221 is very high on the distance below maximum and time scale, comparable only to April and March in this regard.

Many fruitful queries would seem to be generated by such a counting.

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