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    Hannula, H. (1987) - in Search of The Cause of Cycles (25 P.)

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    RESEARCH BY OTHERS 159 In Search of the Cause of Cycles by Hans Hannula, Ph.D. What Causes Cycles? People have, for centuries, noviced qcles in many things, including the scock market. My own interest ca ‘cles and their application to che market began ia the cay 1970's, wheo I read Dewey and Mandino’s Cycler, The ‘Mysterious Forcer That Trigger Events [Dewey-t]and The Profit Magic of Siock Transaction Timing [First], Since then 1 hove studied cycies and used them reguiatly in my trading. My gecacest successes have been using them to call the 1982 and 1984 cycie bottoms. While cycles have been a practical cool for me, [have always been bothered by # lack ‘of understondiag of why they occu Dewey and Maadino pose wae they cal che imperative question, which: has three parts. 1. Whar is “out there” chee causes eycles? 2.How do these external shychmic forces get teansmicted w earth? 3. What is the mechanism whereby tusman beings, plants, and animals area affected? Recently, I uncovered significant pieces of the amazing answer to this question, pointing ditectly at the cause of these “mysterious forces.” Many people, such as Peter Blades, an investment advisor from Los Angeles, have ‘suspected the answer. In response to = question about what ‘causes cycles, he said, "T'm not real suce, aad it sounds kind of freaky, but if pushed to the wall [d have ro say ic has todo wich astronomical configuratios chat affect behavior on a mass basis.” [Newsweek] What | have fouad is not at all "freoky,” buc direct scientific evidence that the planes are che cause of cycles While space docs nor permit a complete explanation OF al of my Findings co dave, I would like eo explain the search that decd me toa cime series, called the Master Clock, which is desived solely rom an asteopiysical model of planetary ‘motion, and which shows a direct relutionship to major marke cycles. ‘The Search Begins ‘What enabled me ro do eycle work at all was the advent of che personal compucer. Wich this tool have been able 60 progeam a vompreiiensive set of wols to docyclic analysis, ies pulsed in dhe March 1989 tsnee of Technical Amalie of Stocks snd comm dos Capi 61987 by Techni Arsiysn, ne Reprod wih eermission, This ariie inciodes adicionel mastil telsted research condaced by the Foundation pp 164 sn 1, CYCLES seP/OcT 1987 Among the fist rools was a Fast Fourier Transform (FFT) Program [Glass], which was used co produce Figure 1, showing the frequency spectrum of the Dow jones lnduscrial Average over time. This plot isthe result of 46 different FFT runs at approximately .2 year intervals covering 20 years of larket history. To see. the telationships of these spectra over time, Figute 1 shifts ‘each run upward a bic, showing a "stack’'of plots Thus, che lefchaad amplicude scale, which labels the bowom plot, should be chought of as shitting upwards well, as he plows stack EagaEa BSAC: 250) COW SPECTRUM OVER TIME From this plot, itis quite obvious char there are strong eyeles in the Dow, with peaks near 208 weeks, 124 weeks, 89 weeks, etc, Further, these cycles are persistent. If one looks “up the valleys” on this plos, some cycle drift can be seen, but the peaks remain quite skable. Other plots were fun covering the fiest 85 years of chis centery, and they are similae. 160 Digital Filters Help—snd Hurt With cyclic behavior established, I attacked the task of separacing out individual cycles, using che technique of digital filtering (Horst}(Hammning) (Readers unfamiliar with digital filtering should refer to che break out on page 165. "How Digital Filters Work”) With programs to design, test, and run digita! filters, I thought Ihad it made, ‘until I discovered two limitations of digital feers. Figure 2 illustrates the ficse of these Himitarions. To gee a very selective fier requites a lot mace filker weights than a less selective filter, The filter using 999 points is considerably mote selective at filrering out the 124 week cycle ehan the filter using juse 333 poines Table 1 CaERE OE stds TTT ebunasisganl ig i i ig 4 ie a i i Se i ” ei : eg 4 “ i ial £ i 2 OBIE i PiCHER ResPOees 2B § , Figure 4 So why not just use lots of points and very selective filters? oo ‘The reason is thar the filter's output is delayed by one half — | gym the number of daca poinss used in the caleufation. A filer | is simply a specially weighted moring average, Whose result | |" should be plotted in the centet of the data covered. So the fo 999 point, highly selective filter will have its most recent | T ‘output 506 weeks (9.6 years) before che last data point. So ¥ ‘what one is forced to do is to trade off selectivicy for detay. :7 sesame a But good tesults caa be obtained. Figuie 3 shows the t response curves of two overlapping filters used t0 extract the . we 124 and 208 week cytes ftom the Dow. The lower filter mule tiplies the 124 week cycle by 1.0, the 100 week and 160 week cles by only .5, and eles below 90 weeks and above 170 swecks by less than .05. This effectively selects cyeles in the 100-160 week range. The upper fileer musliplies the 208 week cle by LO, the 160 and 300 week eyeles by .5, and ) CYCLES SEP/OCT 1887 ie atin, 161 tyeles above 330 and below 140 weeks by less than .2 . This lfectively selects cycies in the 160-300 week range. ‘These filters were run with the Dow as the input data, with the ousput of the computer rans being the Dow's clic components in the range 100-160 weeks (containing the 124 week gle) and 160-300 weeks (containing the 208 week ce). The filtered eyles are shown in Figures 4 and 5. plor- ted below the Dow, The cortesponding peaks and valleys can be seen, Also aote that the ampiirude changes of the 100-160 week cyte is most recently 90 of more Dow paines, while the 160-300 week amplitude change is a5 much 2 170 Dow poines, These sizable moves are important co both traders and invescos, [fone looks carefully at Figutes 4 and 5, the dclay effect «aa also be seen, Both filters have their last output in lace 1982, although data runs into 1986, ‘Corse Those Variable Cycles Figures 4 and 5 also show why cycles have gone in and ‘out of vogue as a market tool. The real cycles are not cons- tancamplinade or even constant frequency. Rather, they fade in and out, always returning to the basic patiern, bur fe queatly disappearing just when a trader has decided ro bet on one, Notice. for example, the difference in amplicuce in the 1977 and 1981 peaks of the 160-300 week component in Figure 5. The eye cading in 197? accounted for about 170 Dow points, and the very next one accounted for only 80 points. Any technician expecting this cycle ro be 170 points stood t0 loose a lot of money. Allso note the extra tong 1965~1969 cycle in the 100-160 week componens in Figure 4. The cycle, which bad been very consistent in duration, suddenly neatly doubled in length. Again, ecchnicians counting on constant cycles could have lost 2 lot. Figure 5 “ - - i< a 1 i f -i i- 2 i. “| ‘This variability has caused not only a disenchantment, but a debate about whether cycles really exist or ate the ‘amtfact of the analysis techniques themselves. Believers. like myself, worked to develop ways to cope with the variabili- tes and the fileer delays, wich reasonable success. But all of these cechniques were merely enhancements to the hesie spectrum analysis and digital filtering techniques. What was zeally called for was 2 different approach. A Brand New Approach Mg thinking got jolted one day in 1975 when [ran into jan excteacher of mine at lunch. J found chat his main interest was in the cycles in the Consumer Price Index (CPL). He had a theory of how the motion of the planets could physically affece the careh, and was having great Suecess exteacting “known planetary periods from the CPL The astounding thing was thst he was extracting these periods wich five decimal place accuracy. sing techniques thar gave statistical correlation coeffients of 9999 or better(.0 represents absolute certainty) The possibility that planctaty positions could affect che markers is not aew. W. D. Gann [Gann], Foster [Foster Bradley {Bradley}, Jensen (Jensen], LCDR Williams [Wil fiamns} and ochsers have all used various forms of planetary coafigurations to interpret and predict market behavior My interest was reaily peaked when ! found my friend, swith his scientific background talking about @ scientific approach to studying the effect of plancts on earthly cycles The basic theocy is that the planets, es they orbit the sua, cause a scizting effect in the mass of gasses that make up the sun. This is caused by each planet pulling the part of the sun nearest it just slightly, distorting the shape of the ‘mass. There distortions cause movements inthe gisses, which affect the smouat of radiation given off by the sua. This radistion, in various forms, eravels from the sun ¢o the planets. One form, the particles making up the sola wind, ‘wavel in paths that ate steered by the planets, This sola var. ition in radiation causes a variety of changes in the earth's ‘eawironment, such as heating effects, electzomagnetic effects, various weather changes [McCormac], ere. These environ. smeeral changes in turn cause changes in huruan behavior, which should he most devectable in date that reflect mass behavior, such as the CPI and the markets Particular planctary configurations are significant in this theory. When two planets are on opposite sides of che sun, they stretch it into an elongated fora. This is called oppo- sition. (hea two planets are in line on the same side of she sun, their forees combine to distort the su toward chem, This is called conjuction, When two plancts are at ninety degrees to each other, they distort the sun into an unbalanced triangle. This is called quadrature. These con- figurations are shown graphically in Figure 6, As the planets rotate, these configurations recur at regular intervals, lead- ing to « whole vasiczy of planetary cycles. These subtle dis- CYCLES SEP/OCT 1987 162 tortions cause tidal waves in the sun’s gasses, just as se moon's pull causes waves in earth's oceans. Figure 6 ‘What excited me about the Solar Eagle's* theory, was that these effects should all be measucable and scientifically veri able. Lsevsited my Dow spectrum (Figure 1) with a view toward analyzing it to see if planecaty forces could be involved. The basic approach is to compute all the cycles the planets could make, and then look for relationships between them and dhe market cycles. "Table 1 shows a spread sheet for iesting the various planetary syaodic"™ periods versus the 208 weck Dow cycle. For simplicity, only four planets are used: Mercury (M), Venus (V), Eatth (E}, and [Jupiter (f). The fitse four rows of the spread sheet show theiz basic periods. Synodie periods are showa in rows 5 through 10. Complex syaodie periods are shown in the rows 1137 ‘The notation M(VE) means the complex synodie period fotined by the petiod of Mercury and the syaodie of Venus and Fath. Columa 5 gives these planctary periods in weeks. ‘What we are looking for here isto find some direct integer (whole number) relationship between an earthly cycle, such 45 the Dow 208 week cycle, and the planctagy cycles. For ‘example. ifa planetary cyle of 104 weeks existed, exacely wo of them would occur during an earchly 208 week cycle, providing evidence thac the two were possibly related. *Solar Eagle is what my friend calls himself. He isa recited Air Fotce pilot, as well as a teacher and scientist. 4A synodic period is one made up by the motion of two ‘ormore planets, As one planet orbits, another faster planet catches and posses ic in one synodic period. More complex synodic periods come when one planct passes anether while ics itself being passed by a thitd planet. Synodic periods thus give the petiod berween the recurrences of pasticular planetary configurations. The synodic period of ewo planets With periods A and B may be compated by: AxB SAB} ‘To look for these possible relationships, Cohuma 4 gives the ttal period of 208 weeks divided by the planetary sya odie periods ftom column 3. What is important here is to Jook at the fictions. A fraction of 3333, for eample, would indicate that three of chat planetary cycle would coincide exictly with one cycle of the earthly event, so might be Gicecdy tetared co it. The mote sack relationships berween the eattly cycle and the planerary cycles shat are found, the ‘more likey it is thas the planerary cycles could actually be causing the eacthly cycle. Ifo, oF only a few such eice rela- Sapchps a found, there le psig of acause and effect For those cases where a fraction is neat one chat would indicate a aice lationship (such as 000, .2500, 333, 5000, exc), a minor adjustment can be made to find out what the exact planetary cycle is which might be showing sp as an approximate earthly cycle. These adjustments are eavered manually after column 4 is inspected. Column 5 is his nearest ideal catio. Coloma 6 is this idea! cacio nvultiplied by the synodic period from columa 3. This gives the exact planetary cycles that could be causing 2 homical 208 week Gytle in che markets. For example, row 8 shows that 2.5 ‘Vens-Earth synodie periods cake 208.551 weeks, very close to the nominal 208 week Dow peak. Examination of colums six shows chat practically all of the possible synodic periods of Meteury, Venus, Jupiter, and Ears are celated and could be causing a nomizal 208 week cle on Earch.“Tt does not prose taat the cause and effect js really cheze, bur it strongly supports the ease thar ie is Perens Sew CYCLES. SEP/OCT 1987 Study of Table 1 and Table 2, which shows the 124 week results, gives strong evidence that these are many nearby planetary cycles that could contribute ¢o the 208 and 124 week Dow spectrum peaks. Similar analysis on the other spectral peaks give sieilz results. Very cleatly, the Dow spee trum hasa very solid association with the ploneeary periods ‘Any trade: not aware of these relationships could beat risk The frightening ching is, however, that there ate so many planetary cycles involved. What i really oat there" are mot single cycles, bat whote families of them, slipping by each arber slowly, somesimes adding in phase 10 meskes power, fal sete, sometinses canceling each other to make the pele Hissppear, just to beep us mortals guessing That is the explanation for why, in Figure 2, che spectral peaks ace $0 broad ‘An Astrophysical Computer Model In eeying to deal wich this complexity [finally recognized that one limitation of the approach was that it was an indirect technique. It was based on trying to draw conclu sionsfrom the data icelf. I proposed ro my mentor the pos- sibility of using a mote direct approach, actually building 2 computerized model of the solac system, With his encourigement I began to build one. The first part of the mode! isto caleulate che plane's posi- tons, This is possible if one knows certain constants, and what time and dace it is. Then, the vatious asttophysical forees, such as the gravitational pull on the sun, can be programmed. These forces can then be computed over any ‘ume period, giving 2 geaph of the force. Wich such a model, the forces may be individualiy compured and examined for affects on another time series, such as the Dow. Since the oly vasiable input ro this model is time, ic is ood for past, present, of future, Any relationships to a matket discovered can then be used for predicting funure market moves. 163 Manr, many forces have been analyzed and compared, looking for diteet linkage to matket action. Finally, on¢ emerged which worked well, I is the sum of all the plane tary strting forces, compuced by where K is an arbitrary constant t0 adjust for uaics of ‘measure, M is the mass ofthe planes, and R is che distance ie is from che sun. The equation is derived directly écom the Jaw of gravitational attraccion found in any college physics ook. Ac first, this force scemed to have no relationship to the Dow, so various moving average filers were tied. There was 2 particularly strong cycle of about 1.6 yeats that [tried to smooth out. It frustrated repeated efforts to do so. For some time I considered ita “royal pain’: Buc ic is now called the Master Clock for reasons which will become clear It's value became apparent one day when Thappened to plot the stt- fing force, Blteted successively by 125, 33, and 15 week m ing averages, versus the Dow 160300 week dara. This is shown in Figure 7. ‘The Master Clock as @ Synchronizer Examination of Figure 7 shows something rather astound- ing. The Dew 160-300 week cycle (top trace) has peaks and valleys that synchronize, evea when they slip, with the Master ‘Clock (bottom trace). ‘The uiangles mask these “lock in” points. Figure & shows the same effect for the Dow 100-160 ‘week cycle, although there are two poiats (circles) chat did not lock in. ‘This suggests that the following is occurring: Things on cateh behave as normal dyoamic syseems, having a “natural Figure 7 Figure 8 CYCLES SEP/OCT 1987 164 response’ of their own. External foives cause a “forced response”, When the two arc in step, strong motion occuts This is completely in keeping with the known engineering theories of dynamic systems (Cannon). cis ike spinning a bicycle wheel. Irspins ara given rate. ‘When you stroke it, you stroke roo slowiy, you slow it down, if you stroke 100 fast, you speed ft up. But if you keep strok- ing, eventually che wheel will srachconize with your stroke ing. Markee cycles behave in chis manne. The only problem is that there are many y!anecaty forces stroking the wheel. Sorting them all oue is the trek ‘The Master Clock immediacely provides a vahtable rool for this cycle work. Ican be used zo overcome the delay effece of digital filters by extending the filter ourput up to date and even into the future. This is shown in the ewo dotted Tine extensions of the top traces in Figures 7 and Figure 8, ‘One takes the average cyele length and adds it to the most fecent cle top or botcom, and testo find the Mascer Clock high or low chat might provide a synchronization point in this viciniry. used this technique to call the neatly simultaneous bor- toming of these two cycles in 1982, and che marker borcam in 1984. These have proven to be very significant historical bottoms ‘The Master Clock and Classic Cycles Alleged in the Research of the Foundation for the Study of Cycles ‘The Foundation for che Seudy of Cycles [Wilson] has éatatogued cycles in a myriad of things for many years. f she Master Clock is really a grear synchronizer, those eycles should relate. Dewey and Mandino give many cles in their bbook [Dewey-l]. Some of these are shawn in Figuce 9 ‘The Master clock is plozced at the top with vertical lines deawn through each high and low. The 2-3 year and 3-6 year cies are the two Dow cycles just shown, idealized as triangular waves. The 107 seer oycle is the actual sonspot eycle that oxcurted over this period, taken from NOAA daca, The remaining cycles showa sce feom pages 191-196 of Dewey and Manin. The 5.91 year eycie shown is that found in coal stock prices, sunspots, copper prices, copper stock prices, grouse abundance, pig iron prices, business failures and callroad ‘stock prices ‘The 8.0 year cycle shown is found in precipitation, crude petoleuns prodaction, iron production, and Ohio valley rain fall. This ciel, slightly displaced in time, is also found in sugat prices, butter prices, corcon acreage, barometric pres- sure, ril stock prices, Goodyear sales, cigarette production, the purchasing power of eggs, red squirrel abundance, coal production, pig iron prices. lynx abundance, sweet potato production, whiting abundance, stock prices, batley, tain fall, lead production, and the growth of pines. ‘The 9.2 yearcyele shown occurs in partridge abundance, Pig iron prices, copper share peices, common stock prices, ‘wholesale prices, Lewes River closings, industial sick prices, ‘ee rings, and rail stock prices. Displaced versions of this cacle occur in grasshopper abundance, British consol prices, auro sales, lake levels, and patears issued The 9.5 year cle shown is that found in Iyox, salmon, and caterpillar abundance, ozone, tree rings, wheat acre- age, and intezeational battles. It is also found, with a time displacement, in river runoff, barometric pressure, mage netic fields, and rabbit and chinch bug abundance. ‘The 182 year qyle shown is found in stock prices, Ham- burg construction, real estate activity, ceal este transfers, residential building, and building construction, With somc= i ae Hi t i OW AND MAJOR TURNING POINTS CYCLES SEP/OCT 1987 Filters ase tools for “tuning isto" partsof the tocal energy contained in aa infoomation stream. For example, all of the information traasminced on the AM dio stations near yott “atdhes at your car radio: Ifyou dried to ligeen eo it all, ou snould heara teiribl, useless din. Bor with your radio’ dial, you.can adjost the: “center frequency" of the radio's filter aad sclecs the one station sox wait to hea, J essence, the “filet operates as an clecttonie dear, which cin be sid along the dial, lcting some of the energe through. if the doot is shaped properly, only. one statioa at a ume’ can gee through. { . } lea similar Gshion, the iformation contained in a ser ics of umber, such as stock prices, can be selected based ‘on how. frequently chey change. The popular moving aver- pe ape ae ofach eke ingens cteeteom. sists of a sec of “weights” (set to | for che moving average) by which each data point is mitbiplied, Then ali these mul- } plication produers ate added, and che'surt is divided by } the mumbex 8f poiats in the filte® to give ag ourpint*FL2" ‘forone point in the fileeted data. Afier compacinig one out- put point, the fileer weights are slid forward one dave, and the pfdcess repeated, For example, the dua shown below can be feied with 84.5 point filter using weights of i, 4; 10 13. and 2, what different timing ic shows up in fava tzee rings, sales of as industrial company, aed marriages. The 41 month cycle is the famous Kitchin gle, which sas been found in many price and production gies, includ- ing stock prices ‘The 18.35 yearcycle is found in real estite activity, build- ing construction, loans, lumber production, furniture breducion. pig ion pies rl stock pies, and aches. The fons shown is for teal estate activity. Close examination of Figure 9 shows the amazing resule: al of the cycler bave a relationship to tbe Matter Clock. todeed, the association of all these cycles with the astrophysical model is what suggested the term Master Clock. This Master Clock is strictly composed of an astto. physical model of plenerary configuration. The eause of the ‘ycies may lie ia che heavens ‘The Search Continues Does this result mean that other things, such as Elliott Ware Theory, ate not valid? No, In fact, this result helps explain why theze should be persistant wave action. Bob Prechter, publisher of “The Elliott Wave Thcosist”, very effectively uses cyle techniques co help him sort out the wave counts. The Master Clock and other outputs of the 6 F i986 F 2=05 6 100° X= 46 6 ao Xin = so. 6 100° X13 S 15.0 6 70" X202 40 6 3.0: —_— 6 3.0 415/53 = 83 = 6 3.0 Filtered dara for 6 BO SES Gragg 6 60 2 6 5.0 6 100 6 80 6 loo 6 7.0 The next filer ouiput can be‘cakestaied by sliding the ‘weights down one day, and repeacing the process of riulti- ply, add, and divide. “Toy it:‘The new fikter output should 5e-8.54. If you continue to calculate these digits, you are digisaly fieting the daca. € you plot the data and your filter's oumpue, you wilt gee the: plot below. Notice how picely shis filer selecis-the slower moving cycle in the data aod eliminates tie faster cjcle. With proper choice of filter syeights, the faster eyele could be extracted, astrophysical model can be used for che same purpose, Fur ther, the Mastet clock may relate to and explain many of W. D. Gann’s techaigues. ‘Cuttent rescatch is focusing on using the model ro help ‘ideauify turning points (called astro points) at which pat- ticular markets reverse tread, very much as Wilder is appar- eatly doing with his Delea system [Bowman]. While results are not yet finalized, progress i encouraging. Figure 10 shows fone recent result, a set of major turning poines compited for the Dow from 1981-87 Conclusion One cannot but be amazed at the Master Clock. Detived completely from an astrophysical model, i relates direcly to gles extracted from real macket data, Further, it has been shown to celate to weathet [Larson}, and many of the cassie onmatker cycles. Ie is a new siep in ele analysis As encouraging as these results are, we are just begin sing to understand the zeal nacure of marker cycles. The personal computct has now empowered millions to take up the investigation if they wish, Hopefully, this discourse on the approach and techniques | have used will coable and ‘encourage others ro do their ows cyele research, as the work and encouragement of the Solar Eagle have paved the way for me, Happy Trading. CYCLES SEP/OCT 1987 166 # a DIGITALLY FILTERED CATA In essence, these Calculazions have the effect of multiply | ing cycles of diffeceat fiequescy by a differene constant: called the gain, fr our exampte, the gain for the longer oyele ‘was 1.0,sad thar for the shoitereyéle was about <1: A graph af rain yemcs the lengths used show the respome of the filer For an easily understood text ox digital fikering, refes to [Hamming}. ce Bibiiogsaphy (Sovran). Bon, "Wider Bas ihn Apelysf Stok and Commas Ear 195. (HOD Bei. Mr Pedro Ure unos 2 {Cinoon/&CanconJe, Domi of hy Sptem Me Gro il 1867, New York. Posi (Dever Dovey ahd Mande, Gc he Meiers Tht Tig i Ea at Bok, BT, Ne ok (Dey Dewey Dai, Cher he Sart of Pdi Fonds toa fhe Sy of Cle, bn Pont] 0 over Fong he Repay Moun ian “as 088, llc Ce {Cn WD Ch: Hw ake Pr ie Commadhig LabenGaca blting 7, Pere, Wa (chs) CA Gl, Diet inst and Stems USAE Aen 1975 (Barong) We Hasan, Bg Bers Pre Hal 15? Ee eed ic 81 (Hire) i te ef apf Sd Donan Ting, Price al 10 Eogewod Chie NW cts] ft nd Spot Mares amber Guns Ptaitog 17 Puen. Kanon] 82 tae, “be Manes Aa Our West” Sine Fa ep, ae emer C0, (Cai Bly M Mccain, Winter apd Cite Respomes Sou natn: Csltade hsied Ualcaly Pee BS Bede Sen 0 Ieee, "Mass Guns Jol the Doe's p30, July 2.1986 {Wa eDKD lar dw: RonomeyLnelpn Pasion, _ (Mikel Lt Witon, Cue of Gur aedacn rte Say Che, 16, Pau The two Dewey books, Cycles: Tre Mysterious Forces that Trigger Events, and Cycles: The Science of Prediction, as well as the Wilson book, Catalogue of Cycles, referred to in the above text are available They are three of the four major works of the Cycles Classic Library Collection, an elegant, leather like, gold-embossed numbered collectors’ set. ‘The Mester Clock is available on IBM disk or hardcopy graph. Send to: Foundation for the Study of Cycles, 124 Highled Avenue, Pittsburgh, PA 15206 (412) 441-1666 —— CO Classic Library Collection $125.00 (add $5.00 for postage) Master Clock C IBM Disk $15.00 (add $3.00 for postage) 0 Hardcopy Graph $15.00 (add $3.00 for handling) Taree VISA/MC/AMEX. amber CYCLES SEP/OCT 1987 Check Enclosed 0 newratios. Should government mose toreconnect the dol: lar and gold in some way, athird monetary age would beg. Tn the meantime, let us not be misled into thinking that the 1967-1980 crunch in real stock prices is worse than 1929, ‘or that 1980 represents a Kondratieff bottom, Rather than the solid foundation it has been for two centuries previous, T believe that the price of gold represents an economic source of confusion since 1971, thanks to Nixon-omies. =GM, Bothell, Washington Robert Ellison replies: Your observatioas are accurate. You raise interesting questions that require further investigation and the test of time, Asto dividing monetary history into several periods, 1971 no more represents a watershed datc than does 1953. Nixon’s 1971 decision abrogated the dollar-to-gold relationship internationally. Rooscvel’s 1953 move abrogated the doilar-to-gold refationship domestically. In botheases, though, the dollar remained the reserve curren- cy of the world; gold, the pre-eminent money of the world, ‘As far as the relationship of gold and the wholesale price index, historical precedent, back to England in 1562, shows the same low below 40% that is occurring now, Even the German hyperinflation of 1920-24 confirmed my ‘hypothesis that the commodity price and security price index relationship to gold remains consistent throughout the World due to international arbitrage. Robert Ellison [Beg to Differ... ‘have analyzed the article by Hans Hannula, entitled “In ‘Search of the Cause of Cycles” [September/October 1987} For seven years I've published a stock market and weather forecasting service based on planetary cycles. So it is with a practical sense that T analyze Hans’ article. found the first part of his paper, dealing with digital l- ters and the Dow, interesting. But he did not make it clear that itis impossible to make accurate cyele progressions and Dow forecasts using digital filters, siace both the dura- tion and amplitude of the filtered cycle were inconsistent. Next, Mr, Hannula attempts to prove that the synodic periods of the planets are responsible for the 124 and 208- week cycles of the Dow. To prove this relationship, in ‘Table 1, he (1) determines the weekly synodic period ofany planetary combination between Mercury, Venus, Earth, 32 and Jupiter; (2) divides that oumber into 208 weeks; (3) corrects that figure to be a multiple of 3333 to coincide ‘with Earth's synodic period; (4) then, startlingly, be multi- plies that aumber times the fist figure again. ‘Then he claims that “practically all of the possible synodic periods ase related and could be causing a nominal 208-week cycle on Earth.” He describes his Master Clock as “the sum of all the planetary stirring forces.” Thea we go on to learn that the Master Clock isthe product of a 13-week moving average of a 33-week moving average of 2 125-week moving average. Such a high degree of processing usually indicates a forced fit rather than causal effect, Next he compares the Master Clockto Doweycles (Figures, and 8). In Figure 7, the Master Clock cycle has 45 peaks andbottoms, and the Dow eycle has 18 peaks and bottoms, Then he concludes that there is an “astounding” coin- cidence between the two. Any cycle with 45 points caa be compared favorably with a cycle of 18 points, due to simple cchance. And he’s not even comparing tops and bottoms favorably, only turning points, And inthe 27 times (Figure 7) and 14 times (Figure 8) that the Master Clock did't in- dicate a turning point in the Dow, Mr. Hannula gives no criteria with which to judge what Master Clock turning points to use and what to ignore. ‘Neat he claims that the Master Clock coincides with all of the Foundation’s classic cycles. He supports this claim ‘with Figure 9, wherein 105 vertical lines are nonunifoctaly drawn through the tops and bottoms of the 10 cycles and the Master Clock cycle. Figure 9s entirely unreadable and incoherent, and in no way substantiates his claim that “all of the cycles have a relationship to the Master Clock.” Finally, there’s Figore 10, wherein he compares 11 of his “Master Clock turning point signals (with no precise dates) toachart of the Dow from 1981 to 1987, Tt looks good, but close examination reveals otherwise. According to turning point logic (ifthe markets going up, sel ifit’s going down, buy), five out of the 11 turning points should have been the opposite of what he indicates. For instance, the fourth Master Clock curing point occurs in September 1982, rightin the middle of a rip-roaring Dow advance. Accord- ing to turning point logic, that should have been a Sell sig- nal, aot a Buy signal as indicated. However, even ignoring this problem, from signal to signal, only four out of LLwould have been profitable, and three of those only marginally. In summary, the author presentssome cycle research which is of no predictive value and mathematically questionable, His attempt to provide a predictive tool turns out to be very CYCLES January/February 1988 highly processed, which throws doubt on its predictive, let alone causative, usefulness, What predictive value there is 1oit is loosely applied and inaccurately presented. In con- ‘clusion, I think there's room for improvement, any Berg, Omaha, Nebraska Hans Hannula replies: T would like to comment on Mr, Berg's letter. He raises several points that are not valid, and that would have been clarified bya more careful and studious examination of my article, But others may share Mr. Berg's confusion, so an ‘explanation i in order, Mr. Berg asserts that it is “..impossible to make accurate cycle progressionsand Dow forecasts with digital filters be cause the amplitude and duration are inconsistemt.”: This ispartly ruc and partly faisc. Properly used, wideband fl- ters will extract a cycle, complete with its variations. The ‘only problem sits delay. It isan historical research tool of ‘tremendous value ifused skillfully. Itis true that, without other tools, this does not allow one to predict the Dow. ‘Anny too! that uses an accumulation of past data alone to predict a time sequence, without an understanding of the tunderiying causes that affect that time sequence, will fail. ‘The whole point of my article is that prediction is possible iffone can establish the links between the earthly cycles and the very predictible motions of the solar system and the ‘computable forces within it Mr. Berg's second comment conceras Tables 1 and 2. Regretflly, he has missed the whole value of them, Tam not merely massaging numbers to “amaze” readers, a Mr. Berg implics. Nor am I attempting to “..prove that the planetary periods are responsible for the 124-and 208- week cycles of the Dow.” The tables are used simply to answer the question, Is it possible that there are exact in- teger relationships between earthly cycles and planetary cycles? and to give a simple procedure for examining the possibility. The fext in the article explains the procedure accurately, so { shall not repeat i here. What these two tables establish isthat there are strong integer relationships between the planetary eycles and the Dow’s 124- and 208- week oycles.. For example, the 16.5 Mercury eycles (Table 4, Hine 1) tell us that 33 cycles of Mercury would equal (wo sarthly cycles of 207.3555 weeks, This docs not prove a relationship. It merely establishes a possibilty, presents evidence of a linkage, and gives a very precise cycle length to wse in re-examining the earthly data, ‘This method is much more useful if one has high precision estimates of theearthly cycles, hopefully to three or four decimal places. ‘The nominal 208-week cycle used as an example does not really do justice to the analysis method because of its low CYCLES January/February 1988 precision. Ifone had a more precise estimate for the cycle, such as 207.3555 weeks, one might start to think they had “proven” something, But mathematically and scientifi- cally, one must treat claims of proof very carefully, which iswhy say that the tables“. give strong evidence that there are many planetary cycles that could contribute...” Prooks are mathematical operations that arc absolutely true, Evidence of a cause and effect is just that —evidence. You may choose to believe the evidence or not. The scientific approach isto pursue the trail of evidence, and try to verify for refute it with further research, Using much more sophisticated techniques than Fourier analysis, i is pos- sible to extract cycles from the Dow which have three to four, even five, decimal-place accuracy, and then find exact planetary period multiples that compare very accurately. For example, Peter Eliades has reported a market cycle of 218.667 weeks; 74 orbits of Mercury take 218.665 weeks, ‘which isa comparison ratio of 1.000091. ‘The third point Mr. Berg raises is that the Master Clock, being smoothed by threc different moving averages, must have been a“..forced fi.” This simply is not true, Tam an experienced scientific researcher, and I would never force evidence. The smoothing used is very carefully chosen to actually implement a digital low-pass filter designed to eliminate high-frequency components in the data series, ‘which isa standard procedure in scientific computing. The key point here is that the 1.6-year component is so strong that it refused to be eliminated. Interested readers should refer to Appendix of [Hurst] for a derivation of the filter behavior of moving averages. ‘The fourth point Mr. Berg attempts to make is that synchronization of the Dow cyctes and Master Clock shown in Figures 7 and 8 is random and could occur by chance. This is not true, as is easily shown by probabilities. Assume the two series are independent. If we take the in- terval of the graphs (37 years) and apportion the years into 12 monthly “buckets,” we gt 444 buckets. Now if we take Figure 7, with 45 Master Clock peaks or valleys, we get a probability of finding a turning point in any single bucket of 45 out of 444 =. 101, Similarly, the probability of find- ing a turning point of the Dow in any one bucket is 18 out of 444 =. 405. Now, to find the probability that we find both Dow and Master Clock turning point in the very same bucket (ic. within a month of each other), we multi- ply the probabilities, and get .101 x 0405 = 0040945, or ‘one chance out of 250. That is the probability of finding just one such alignment. Figure 7 shows 16 such align- ments, which is even less probable, I leave it as a simple exercise for readers to compute the probability of doing something 16 successive times if the chance of success on cach try is one chance in 250, The correct answer realy is “rather astounding.” Mr. Berg claims have not given any guidance about which Master Clock turning points to use and which to ignore. T do, in fact, give a specific technique in the next-to-last paragraph, under the heading “The Master Clock as a Synchronizer.” That technique allowed me to call the 1982 bottom, the 1984 bottom, and the September 1986 bottom, s0 it does have practical value, Mr. Berg is unhappy with the size of Figure 9. On this, we both agree, 1 have repeatedly asked to bave my graphs printed larger, but the pressures of print space seem to die- {ate otherwise. I provide all my graphs on8x11 inch paper, and they are reduced for publication. Any reader who wishes larger copies may write me directly. Mr. Berg has been sent more readable copies under separate cover. ly, Mr. Berg objects that he could not have traded the market successfully using Figure 19. Itwas never my intent that enyone use that illustration for that purpose, Mr. ‘Berg has incorrectly interpreted Figure 10. Its simply am early example of other research on market curaing points using more recent work, and is actually a separate piece of ‘work from the Master Clock, as carefutly explained in the article, The Master Clock work was dane nearly a decade ago, and my rescarch has progressed greatly since then, Mr. Berg incorrectly assigns his own Buy and Sell rules to Figure 10, assuming incorrectly that the short-term trend atthe turning date tells you whether to buy or sell, which is invalid in my approach, What Figure 10 does show is that a few well chosen, astrophysically derived points can give a very good approximation of a longer term cycle in the Dow. My work has progressed quite far beyond this, in fact, and I have successfully picked skort-term turning points within days. But I do not feel such matters are ap- propriate material for a nonprofit research journal, so I ‘hall not discuss them here, appreciate the interest Mr. Berg and other readers have had in my work. Ihave received many supportive and in- formative letters, and am encouraged by same of the work being done in this arca. I know planetary cycies are impor- tant. To master them takes work and skill, This avenue of research has boon extremely fruitful for me, which is why F have published this material for others, even against the ad- vice of some very trusted friends. Those who hope to fol- Tow this line of research must understand their physics, mathematics, computing, and systems theory, and apply the scientific method rigorously, or they will be swallowed up in a sea of confusion, Hopefully, this letter will pare some of the waves for Mr. Bergand perhaps other readers. Fans Hasan HOW IT CAME OUT See a Soybean Prices (Right) Sill Earthquake Cycle: cies Maximum Stress Periods. ‘Through February 1988 any anuary 18, 1988 February —none Scenes te CYCLES January/February 1988 OM \ ies ‘CALENDAR OF EVENTS See page 43 for calendar listings. LETTERS ‘The Harmonic Relationship of CPI Spectral Density Periods to the Anclent 39.5797-year (474.957-month) Solar Cycle An article by Michael Niemira, “In Search of Economic Cycles" [January/February 1988}, included a chart that plotted cycle lengths and their spectral densities derived from the monthly CPI values between 1948 and 1987. if cycle lengths with a spectral density so lowas to consiitute null are included, then 21 cycle lengths are shown, In an attempt to trace the individual cycle lengths back to known solar and lunar cycles, I observed that several cycle lengths were harmonics of an ancient 39.5797 year (474957 average month) solar cycle. I decided to test all 21 cycle lengths for their harmonic relationship, if any, with the 39.5797-year eycle, The procedure and results are shown in’Table 4 (right). ‘Column 1 lists the Published Length in months of the 21 cycles, with a traiting zero added. Column 2 shows the Estimated Harmonic, the result of dividing the base cycle (474.957 months) by each of the cycle lengths in columa 1, Column 3 lists the Harmonie Integer. While some ap- proximations are better than others, there is no doubt that the estimated harmonic figures in column 2 very closely ap- proximate the integers listed here, Column 4 is the Caicusiated Length in months, the result of reversing the process and dividing the base cycle (474.957 ‘months) by the harmonic intcger in column 3. CYCLES March 1988 ‘Column S lists the Difference between the published eycle lengths and the calculated cycle lengths, in months. Notice that the worst case difference between the caleu- lated and published cycle is 0608 month. This is equal to 2daysin a span of 118 months! Its rather remarkable that the spectral lines picked out of the CPI by an unbiased spectral analysis are so well approximated by 21 consccu- tive harmonics of the ancicnt 39.5797-year solar cycle! Asan additional comment, Td like to point out an interest- ing feature of the base cycle of 39.5797 years, It is almost exactly equal 0 61 synods of Venus and Jupiter, 100synods of Mercury and Venus, and 161 synods of Mercury and Jupiter! If these three numbers are each divided by 100, we arrive at the decimals 0.61, 1.00, and 1.61. These are astrophysically derived values that correspond to the Fibonacci scrics so well studied by Rebert Prechter in his Elliott Wave research. Could this be further evidence of the Fibonacci ratio’s presence throughout the universe? are encouraged. Submit your papers to Martin Kokus, “Gravitation Issue,” at the Foundatiot’s address, ‘Now Science Newsletter ‘The Foundation is considering publishing a newsletter on non-Newtonian gravity, nontraditional earth science and carthquake prediction, planetary sunspot influence, noa- big-bang cosmotogies, and grand unification theories. The newsletter will publish current developments in these fields, as well as subscribers’ papers and predictions, help in securing data, and facilitate networking, If interested, contact Martin Kokus at the Foundation by September 5. CALENDAR OF EVENTS World Headquarters Chapter Meetings ‘The following speakers arc scheduled to appear at upcom- ing meetings at Foundation World Headquarters, Irvine. August 9 Martin Kokus: “LunariSolat Cycles ia Earthquake Prediction” September 13 Walt Bresser, Peter Eliades, Peter Hacksteddes 1988-89 Stocks and Commodities” Panel ‘October 11 Sherman MeClelian: “The McClellan Oscillator” If you can’t make the mecting, detailed summaries are available at $5.00 each, $50.00 annually, Spring 1989 : “Cycle Linkage II” The Second Annual Cycle Linkage Conference, “Cycle Linkage 1,” will be beld at Foundation World Head- quarters in Irvine next Spring. Papers arc now being ac- cepted for consideration. Deadline for completed papers is December 15, 1988. ANNOUNCEMENTS: Upcoming “Gravitation” Issue Gees will devote an upcoming issuc to non-Newtonian gravitation and fifth foree theories. Papers are invited on these and related topics in earth science, astronomy, and cosmology. Papers should conform to the writing style and math level found in Cycles. They should not exoced 2,000 ‘words, and jargon should be avoided. Graphs and figures CYCLES August 1988 LETTERS Planetary Effects on the Sun In view of the recent surge of interest in the barycentric ‘model of the solar system, it seems appropriate to caleu- late the relative forces excrted on the sun by cach of the planets (see Table 1). GRAY. isthe gravitational force of each planet at the sun relative to that ofthe Earth; TIDAL is the tidal force of each planet at the sun relative to that of the Earth; BARY. is the relative effect of each planct on the position of the barycenter with respect to the sun compared to that of Earth; MasS isthe mass of the planet cqmpared to the mass ofthe Earth; PERIODis the orbital period of the planet rela- tive to Earth's; RADIUS s the average radius of the planet in astronomical units, as found from Kepler's law relating orbital periods and radii (included for reference only). ‘The relative magnitudes in the THDAL. column help explain the emphasis on Mercury, Venus, Earth, and Jupiter by the cycle students of antiquity, while the relative magnitudes in the BARY. column help explain why modern studies af ong term effects concentrate on Jupiter and Saturn, ~ Sol Eagle 203 Rena nan CALENDAR OF EVENTS. WHA Chapter Meeting The World Headquarters Chapter mecting on October 11 will feature guest speaker, Sherman McClellan, ‘who will discuss his invention, the Mo- Cellan Oscillator. Elliott Wave Conference ‘A one-day Elliott Wave Conference, “The Art of Trading with Elliott Wave,” will be sponsored by the Foun- dation in association with Glenn Neely. The conference will be held on Saturday, December 3, from 9 a.m. to Sp.m. in Los Angeles. Fees for mem- bers are $395 ($455 nonmembers) for fescrvations made before November 5. See page 223 for details. 1989 Annual Conference ‘The Foundation’s Second Annual Cycle Linkage Conference, “Cycle Linkage II,” will be held March 9-12, 1989, in Irvine, California. Fees for members are $295 ($355 nonmem- bers) and include workshops and lec tures on Friday and Saturday, as well as the banquet Friday night. A field tripis planned for Sunday. See the ia- side front cover for details. CYCLES September/October 1988 LETTERS Cycles Group in New York Lam looking to join/form a local (Cycles/CAP TT group. Anyone in the (212)(718)(516) area codes may « tact me at (516) 531-1015 during busi ness hours, or at (516) 666-4544 evenings and weekends. Tim Long Meville, NY Masterclock Decoded Hannula’s Masterclock [Cjeles, Sep- tember/October 1987, p. 159-166] raises some interesting possibilities and ako some interesting questions. (Gee, for instance, Cycies, Suly 1988, p. Hisreference to solar tides isin- triguing, but analysis of the mas- terclock revealed that the alleged relationship with solar tides is some- ‘what tenuous. This does not mean that iis invalid. The trath is, we have no real knowledge about the me- chanisms that couple the planetary positions to the behavior of the stock market. To gain more understanding, however, the study of suspected relationships is very valuable, Solar tides are caused primarily by the four tidal planets with the following relative tidal forces: Mercury 1.15 + 0.65 Venus, 2.17 + 0.04 Earth 1.00 + 0.05 Jupiter 2.28 = 032 These figures are derived from M/R?, ‘with mass normalized to Earth mass and R expressed in astronomical units (Earth orbital radius). The variability in the figures is caused by the ec- centricity ofthe planetary orbits. The other planets are usually ignored, having the following relative tidal for- ces: Mars 0.03, Saturn 0.11, and the others less than 0.01, MAK FORCE = coR(aNcLs) FIGURE 1 ‘Tidal force diettbuiion in the ‘squatorial plane due to one planet, FIQURE2 Tidal fores istibution In the ‘equatorial plane due to two. planeta st 0" ‘DAPORMLT DISTREOTED RADIAL PORCES ‘Tidal forces as computed by M/R? do not add vectorially. This equation only establishes the maximum force ex- ‘erted directly in line with the planet. ‘A single planet causes atidal force dis- tribution that is a cosine function of the angle between the direction of the planet and the direction of each Sun surface clement under consideration. Figure 1 shows force distribution in the equatorial plane; but distribution in the meridial plane in the direction of the planet is identical. Since tidal forces are the differences between gravitational (decreasing with range) and centrifugal forces (iacreasing with range), tidal forces induced by a planet om the opposing hemisphere arc the mirror image of those on the facing hemisphere. Hence, the Sun is pulled from both sides, resulting in @ tidal bulge. (The Earth-Moon system works the same way.) ‘The tidal forces duc to the position of ‘two planets in line are simply the sum 246 of their individual distributions (see Figure 1), irrespective of whether they are in conjunction or opposition. So from a tidal point of view, conjunction ‘and opposition have the same value. Two planets with equal vidal forces (Venus and Jupiter) at 90° from each ‘other cause a tidal force distribution in the equatorial plane as shown in Figure2. The forces are now uniform- ly distributed, strictly in radial direc tion, with magnitudes equal to the (maximum) force of a single planet. This is not the case in the meridial plane, however, where the distribution isstill analogousto Figure 1. Fortiaree and four planets, the picture becomes ‘more complicated and can be found by (vectorial) addition of the forces for cach individual element of the Suo’s surface. Thus, it can be seen that addition ofthe tidal forces on the ‘Sun's surface is not a trivial matter. The 1.6-year cyclic componcat of Hannuls’s masterclock appears to be a straight vectorial addition of the ‘maximum tidal forces (M/R°) of Venus and Earth, Hence, it kooks like vectorial addition of the gravitation- al forces, sealed to tidal relationships. ‘Asa result, the synodic beat frequem- ‘cy of Venus-Earth (VE) is obtained as shown in Figure 3, The tops of this synodic cycle are caused by VE con- junctions, and the bottoms by opposi- tions. From a tidal point of view, tops and bottoms have equal value. Aad, indeed, Hannula uses them this way, since they cach sometimes coincide with market tops and sometimes with market bottoms. Comparison of Figure 3 with Han- nula’s Figures 7 or 8 [Cyetes, Sept/Oct, 1-163] shows the coincidence between tops aad bottoms of the masterclock and the VE-cycle, except that Han- mulareverses the sign. Hence, his bot- CYCLES September/October 1988 £ 2 2 + “ 4 s FIGURES —Venus-Earh Synodie Cycle FIGURE 4 Reuits of Masterclok Analysis toms are coincident with conjunctions andbottoms of the VE-cycle are used, phenomenon, such as the markct, are and his tops with oppositions. Ta ad- ition, the VE-cycle in the master- lock is superimposed on a derivative of Jupiter's orbital eyele. From a tidal point of view, there is no slower planetary candidate available to beat Jupiter against; so Jupiter apparently bas been beat against a fixed poiat on the ecliptic. At first sight, this secmed to be the vernal equinox. Closer amination, however, revealed that itis Jupiter's perihelion at 15° from the equinox. Hence, at the top of the Jupiter-derived cycle, its tidal forces are maximum, with the minima lo- cated at the bottoms, ‘The masterclock derived this way is shownin Figure 4, Again, comparison ‘With Hannula's figures shows the close coincidence between his masterclock and the analysis presented here. Pur- osely, however, Ihave used the terms “seem” and “appear”, since Thave no knowledge of his code. The basis for his clock, however, is clear, ‘The meaning of the Jupiter cycleis nat lear, since there is no indication in Hanoula's paper of how it is being used. Nor is the reason for inverts the VE-cycle clear. If only the tops CYCLES September/October 1988 my Figure 3 would be sufficient; or a straight listing of the dates of heliocentric conjunctions and opposi- tions (See Table 1) would do, The use of a cyclic curve may have the ad- vantage of establishing aregion or orb. This, however, does mot scem neces- sary, and knowledge ofthe exact dates is useful for further investigation, To see what the exact VE conjunc- tiow/opposition dates mean, I super- imposed them om a chart of the S&P Index. Coincidence with market tops and bottoms is not extremely impres- sive, except for August 23, 1988. This ‘one, however, may be part ofa larger planetary constellation as described by Fults [Sce Cycle Linkage: Planctary-Solar-Terrestrial, May 88, Foundation for the Study of Cycles) However, a very interesting observa- tion is to be made here. “All other planetary studies, to my knowledge, try to correlate planetary positions With exact market, or other, tops and bottoms. But there is no need for this, if individual terrestrial cycles are driven by specific planetary aspects. tis well kaown that individual cycles extracted by filters from an earthly not exactly in phase with precise ‘market tops and bottoms, but thatthe sum of a number of eycles approaches market behavior. And that is exactly ‘what Hannula bas done. The tops and bottoms of the VE cycle are coinci- dent with the tops and bottoms of the ‘output of certain filters. A question that may be raised immediately is, What is the influence of the desien of the filter?. Hannula indicates the use of a multipoint filter in his paper. is that the filter he really uses? What about a simple exponential or moving average filter? Other questions that come to mind are: What about Mercury's influence? What about the other piancts? (The tidal picture may not be necessary at all). want to apologize to Hannula for dis- secting his masterclock. I feel, how- ever, that he discovered some very inceresting relationships between ter- restrial cycles and planetary positions. ‘These relationships should not be ig- nored and deserve further explora- tion. If this analysis helps other researchers in their investigations of planctary effects, I hope to hear from them via this Cycles reader forum, Val Star 247 sonalities” of impulse waves, which any Elfottician would recognize The heart and soul of Elliot is “form.” After all is said and done, the form should be 5 waves up and3 waves dovwa, not 3 waves up. When Elliott found anomalics, he devised principles to explain devia- tions between the actual market and ‘normal wave form, These were rels- tively minor, For example, the Zig- Zag, the Flat, or the Triangle ‘orrections are ways to understand 3 waves down, But they all go down, for the most part, not up. That's the idea of form, JaNecly’s work, a correction can go ‘up—not just alittle, but a tremendous amount, In Neely, you lose the “form,” which is the heart of Eliott. The most important part of Elliott is 5 waves up and 3 waves down; of secondary im- portance are the acomualies and sub- Sidiary principles. Neely bas elevated the anomaly to the most important, ‘and form has become secondary. Lastly, would like to say that ie was Robert Prechter who made all of us aware ofthe Elliott Wave theoryin the carly 1980s, He is also the one who used Elliott Wave to predict the great zally in stocks long before nearly all commentators believed it possible. Robert Prechter has continued the great Work that R.N. Elliott began Glena Neely's work may be “addi- tions to” the principles of R.N. El liott, but they are NOT Elliott War Perhaps itis time to draw a distine- tion between Elliott's work (best fol- lowed by Prechter) and Neely's “extensions.” I recommend iden- tification of Neely’s work as “Neely Wave” or “Neely Extension Waves,” so that a proper comparison to Elliott Wave may be pursued, Toe Engsish No Cigar for Star T would like to respond to reader Val Stat’s “decoding” of my Master Clock [Cyeles, September/October 1988]. Simply put, his efforts are incor- rect. His assumption that the published Master Clock was somehow constructed by gluing together cosine ‘waves for Jupiter and Venus is incor- rect, The Master Clock is computed cxactly a described in the original ar- ticle [Gycles, September/Octobor 1987]. T quote: “It is the sum of all the planetary stirring forces, computed by F=GKM/R® where G is the gravitational constant, K is an arbitrary constant, M is the ‘mass of the pianet, and R is the dis- tance it is from the sun... “At first, this force seemed to have ‘no relationship to the Dow, so various: moving average filters were tried. There was a particularly strong cycle of about 1.6 years that I tried to smooth out, It frustrated repeated ef- forts to do so. For some time I con- sidered it a ‘royal pain’, But it is now called the Master Clock for reasons Fig.2 =>3 x00re am4urE MASTER CLOCKIN RAW AND FILTERED FORMS onamdr=n xoOre amore CYCLES December 1988 a BE TP Ee 3i7 which will become clear. Its value be- ‘came apparent one day when I hap- pened to plot the stirring force, filtered by 125-, 33-, and 13-week ‘moving averages, versus the Dow 160- 300 week data.” Inother words, the Master Clock is computed as follows: 1. Compute the force for each planet. The magnitude of the force is ‘given by the tidal force equation. The direction is a unit vector from the sun toward the planet. 2. Add the nine individual forces vectorially, 3, Take the magnitude ofthe result vector asa time function. 4, Smooth the function with a 133- week centered moving average. '5, Smooth the result of 4 with a 33- week centercd moving average. 6, Smooth the result of 5 with a 13- ‘week centered moving average. Tnmyoriginal work, Loomputed the forces every Friday, and used a weck- tydata series. f'calculationshave been done correctly, the resultis the Master Clock as published. Because itis easy to make mistakes inthis type of calculation, Thave made available through the Foundation the precomputed Master Clock, The data series containstwoffites: (1) the filtered Master Clock as computed above, and Q) the raw, intermediate data (com- puted through step 3 above), before filtering. Fig. 2 shows both forms of the Master Clock for 1988. You can see that the Raw Master Clock has a {ot of variability, while the Filtered ‘Master Clock is very smooth. ‘Star asks about the effect of ce fil- tersused. Basically, they serve as low- pass filters, removing rapid swings ia the data while preserving the slower swings. The frequency response of a single moving average filter is correct- ly derived and presented in Hurst's ‘The Profit Magic of Stock Transaction Timing (Prentice Hall] (p. 207-211). Basically, the frequency response is (sin xx Function, with the first zero crossing at a frequency of 6.28 times 318 ——— the span of the moving average. In other words, in the L33-week moving average operation, the 125-week cycle is cancelled out or multiplied by a “gain” of zero, while a frequency of hhalf the span (62.5 weeks) is passed at again of 0.65, ‘Asseries of moving averages such as Tused can be used to build a better Jow-pass filter without too much work. Other low-pass filters can be used, such as an exponential moving average, or a properly designed FIR igital filter. The important step is to make sure that the filter output is properly delayed for the time fog of the filter. For the moving-avcrage fl- ter, the delay is one half the span, or 62.5 weeks for the 125-week filter. Star apologizes for “dissecting” my Master clock. I cannot accept an apology for something that was not ‘done, There wasnever any attempt or desire to hide the computation of the Master Clock. Indeed, the purpose of the original article was to put the com- putation in the publicdomain. Unfor- tunately, it scems to have been a mistake to use financial data for this cycle work, because that has allowed people to assume that T am hiding somethingie the published work. Tam not. What you sce is open, on the table, and scientifically accurate. This, isnot the norm in market work, where “indicators” are invented every second, and “correlations” are used to inspire sales, and practically no one vsessuficient data and testing to back up their claims. ‘An observation that something happened once or twice before “when the moon was blue” is act sufficient data to supporta prediction. Even 30 prior experiences barely gives enough evidence that a correlation is stati cally valid. Without a thorough under- standing of the underlying physical causes of events, one simply cannot make good scientific progress. ‘Once uncovered, the laws of physics always work. While recent re- search om new forces is interesting, 1 have found the well known gravita- tional, tidal, and other classical forces totally sufficient toexplain everyeyclic event that [have investigated. T by no means want to discourage Val Star or any other planctary re- searcher. It is the proper direction, But T would encourage Vat and others to use known physics, good computa- tion, and good sciemific method in their work, And when it comes to my work, please do not try to “read be- tween the lines.” When T publish something, i is all there as clearly as1 can express it anc as competently as I can compute it, To avoid a lot of wasted time trying to second guess what Thave done, call me, Ido answer questions on my published work. Such a question could save hours in work tryingtofigure out why Linverted ‘Venus when I didn’t. Happy Cycling. “Hans Haoeula Fibonacci Ratios in Econometric Time Series... ‘In the past few years, a number of financial analysts bave used Fibonacci numbers to estimate possible wave retracomeats in econometric time series (such as the DJIA), based on the observation that past wave retracements often have exhibited these ratios. This discussion will first cover the ‘mathematics of deriving Fibonacci numbers. I will then show that the ‘mathematical numbers function only because they are a reasonable ap- proximation of the ratios of the average cycle periods (ACP) of the plavetary synodic periods involved in

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