Frequency Analysis based on Monthly Comb
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Short term fluctuations that seem to repeat with a regular frequency are often (even generally) seen in stock price charts. Through the years, technicians have expended much effort to measure and exploit these cycles. It would appear simple enough to do a frequency analysis on the time series. But the cycles or periods that seem so easy to see in the price data, have proven to be surprisingly difficult to measure by classical methods. The classical methods apply to stationary cycles of exactly regular period. We can easily remove the trends from historical price data to make the series stationary. However, the fluctuations seen in financial data are almost never exactly periodic, complicating most attempts to take advantage of these cycles. One factor in the behaviour of market fluctuations is "Anticipation". When speculators detect a cycle in prices, they will buy earlier before the peak, and sell earlier before the dip. This phenomena causes an increase in frequency, and eventually a breakup of the established cycle. Traditional frequency analysis methods such as the Fourier Transform, break down badly attempting to deal with these irregularities. Wilder estimated that there was an important period of about 28 trading sessions. The half cycle of this period (14 sessions) is a default factor in many of the technical indicators. We have found this to be a reasonable figure, even in today's markets, but there is significant variation between issues. Some companies just seem to have faster or slower cycles for one reason or another, and the indicators may be more accurate when fitted to the situation. The paradoxical condition of variable length periods forces the adoptation of some new forms of analysis. |
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Frequency from Monthly Comb Filter
Representative Cycle (Trading Sessions) = 36.00
Sawtooth = 52.06
| Peak Type | Avg. Cycle | Median Cycle | Cycle Mode | Cycle Amplitude | | High | 17.19 | 34.00 | 17.00 | 10.97 % | | Low | 17.00 | 33.00 | 35.00 | 11.61 % |
| Recent High | Price | Recent Low | Price | Cycle | | Tuesday, October 12, 2010 | 22.22 | | | 44 | | | Tuesday, August 24, 2010 | 17.33 | 36 | | Tuesday, August 10, 2010 | 18.67 | | | 36 | | | Friday, July 02, 2010 | 15.89 | 19 | | Friday, June 18, 2010 | 17.90 | | | 26 | | | Monday, June 07, 2010 | 15.80 | 23 | | Wednesday, May 12, 2010 | 19.31 | | | 20 | | | Tuesday, May 04, 2010 | 16.99 | 24 |
Fourier Transform after Digital Filter M | Cycle Length | Fourier Amplitude | | 9 | 0.77 | | 15 | 0.49 | | 20 | 0.40 | | 18 | 0.35 | | 24 | 0.31 | | 26 | 0.30 | | 34 | 0.28 | | 32 | 0.20 | | 41 | 0.18 | | 46 | 0.18 | | 51 | 0.14 |
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Frequency Analysis based on Quarterly Comb
Frequency from Quarterly Comb Filter
Representative Cycle (Trading Sessions) = 79.00
Sawtooth = 52.37
| Peak Type | Avg. Cycle | Median Cycle | Cycle Mode | Cycle Amplitude | | High | 45.23 | 79.00 | 79.00 | 21.82 % | | Low | 47.14 | 69.00 | 53.00 | 32.17 % |
| Recent High | Price | Recent Low | Price | Cycle | | | Monday, June 07, 2010 | 15.80 | 84 | | Wednesday, April 14, 2010 | 20.09 | | | 74 | | | Thursday, February 04, 2010 | 16.15 | 62 | | Thursday, December 24, 2009 | 18.65 | | | 50 | | | Wednesday, November 04, 2009 | 15.82 | 190 | | Wednesday, October 14, 2009 | 18.15 | | | 269 | | | Wednesday, February 04, 2009 | 2.51 | 35 | | Friday, September 19, 2008 | 18.67 | | | 97 |
Fourier Transform after Digital Filter Q | Cycle Length | Fourier Amplitude | | 9 | 0.47 | | 12 | 0.33 | | 15 | 0.26 | | 18 | 0.20 | | 21 | 0.20 | | 34 | 0.18 | | 59 | 0.17 | | 41 | 0.17 | | 24 | 0.16 | | 141 | 0.16 | | 26 | 0.15 |
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Frequency Analysis based on Yearly Comb
Representative Cycle (Trading Sessions) = 0.00
Sawtooth = 63.24
| Peak Type | Avg. Cycle | Median Cycle | Cycle Mode | Cycle Amplitude | | High | 0.00 | 0.00 | 0.00 | 0.00 % | | Low | 0.00 | 0.00 | 0.00 | 0.00 % |
| Recent High | Price | Recent Low | Price | Cycle | | | Wednesday, February 04, 2009 | 2.51 | 625 | | Monday, July 02, 2007 | 73.74 | | | 639 | | | Thursday, August 10, 2006 | 51.16 | 197 | | Wednesday, December 15, 2004 | 64.91 | | | 215 | | | Thursday, October 27, 2005 | 50.19 | 255 | | Monday, February 09, 2004 | 64.79 | | | 164 | | | Monday, October 25, 2004 | 54.81 | 243 | | Monday, June 16, 2003 | 69.03 | | | 298 |
Fourier Transform on Raw Closing Prices | Cycle Length | Fourier Amplitude | | 819 | 5.38 | | 683 | 4.40 | | 585 | 3.98 | | 9 | 2.16 | | 12 | 1.55 | | 14 | 1.49 | | 273 | 1.47 | | 512 | 1.44 | | 455 | 1.40 | | 341 | 1.33 | | 315 | 1.11 |
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XL Capital Ltd.
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Average Sawtooth based on Monthly Combo
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XL Capital Ltd.
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Average Sawtooth based on Bi-weekly Combo
A comparison of the average distance (in time) from each periodic high to to next periodic low, against the distance to the following high point, yields the Sawtooth Statistic. The mid-point, corresponding to a perfect sine wave, is 50 percent. Values less than this indicate the sell slope is steeper than the buy slope, while values over 50 percent show the opposite. The Sawtooth Statistic gives a clue to the general mood of the markets, functioning as a sort of sentiment indicator. The chart represents the sawtooth percentage of (approximately) monthly cycles over the past year, and of the (approximately) bi-weekly cycles, averaged over the past six months.
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