Jun

3

Waves, from Jim Sogi

June 3, 2015 |

We've had some big waves recently. The waves are measured by amplitude and period. We had 6 foot waves with 22 second period. This is very powerful compared to a 6 foot wave with a 9 second period as it stacks up on the reef when it breaks so there is much more water where you are in the wave. The surf prediction services use buoys to give the wave amplitude and period peak to peak, and with two parameters and a direction, we have very good information to determine when, where to go out, what board to use, and how to approach the wave, where to line up. Ocean waves in theory follow a sine wave, but in real conditions so much random influence results in a lot of chop most of the time. That's why we look for a nice clean big swell with a long period. We know the waves are going to be good.

At times, the stock charts have wave like structures and some descriptive method giving the height of the move and the length of time between maxima and minima would be very helpful descriptions if not having some predictive ability. X period maxima doesn't work because the periods tend to differ according to the day and doesn't describe the swings. The daily algebraic range doesn't really capture differences in conditions. There's been some work with sine waves, but that doesn't work either. It's easy enough to see looking back, but it's hard to describe in an algo to find them. Chair discussed percentage and algebraic ranges and it's odd there isn't a simple way of describing volatility. I don't understand implied volatility, but it just doesn't seem right to me with its directionality. Absolute volatility doesn't seem all that great in distinguishing various conditions, nor do daily ranges. I don't mean to Prechterize but the idea is that the waves often do not come as isolated events, but in a series of moves.

In the ocean, tides are generally, but not perfectly, predicted by tide charts which generally follow a sine function. Dr Phil has often mentioned arc sine functions in daily markets which tend to place highs and lows at the beginning and end of the session. This is often helpful.


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  1. Ed on June 4, 2015 10:43 pm

    “At times, the stock charts have wave like structures and some descriptive method giving the height of the move and the length of time between maxima and minima would be very helpful descriptions if not having some predictive ability.”

    Paraphrasing Victor, it has to happen so that the public loses more than it should. There has to be that element of “over” reaction and equilibrium-seeking or homeostasis or the market would blow up and spin out of control.

    The visual structure u see with hindsight is the footprints of this process. Add I the notion of “algebraic” measurement and a framework to compute expected value per unit of time after the signal, then i think u have an avenue for finding a ideas without the usual loss - when it is the other fellow paying for the market upkeep for a change.

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