Following my previous post "New Tools at the Horizon", one question was twirling in my mind: why the stock market is forecastable, but the forecasts are not affordable? The forecastability of the market is an evidence, because if it were not – being it just a random walk – there would not be the possibility to have an output from the neural networks that manage the forecast process. For a neural network to work, there must be some sort of structure inside tha data that can be used to produce the forecast/diagnosis. And this hidden structure is present indeed inside the market data, otherwise r.Virgeel would be totally blind and dumb. This is a sample chart of a blind network: not structure is evaluated and the output is just an array of zero values.

The post was not about the numbers, but about an unique opportunity that Euro based investors were facing (and are still facing). In the meantime the EURUSD has passed from around 1.095 to 1.06 and the SPX from 2140 to 2190: they sum to a nice 5.5/6 % in just one month.

I'm fully aware of the basic fact that every trader and investor has it's own style. Many school of thinking, but everyone is really different, particularly in the private sector. If a private trader survives the first 18 months without being wiped out, then she/he may have the possibility to play on. It's a sad and real statistics: 95% of traders are wiped out in the first 12-18 months of activity. So, if you are a private trader since years, you are in the 5% and you have built your skills with iron and steel, it's not easy to approach a new language.

I have to thank this man, again. For two reasons, mainly: first, because his writings were the eye openers to understand the markets and how they work, even after many years of investing activity. Second, because without the "it's all interconnected" message, I would have not tried to experiment with the artificial intelligence model that powers r.Virgeel. It's always a pleasure to hear him, and here he explains so clearly why the euro is going to fail and why we have to stop thinking linearly if we want to succeed as traders/investors.

Without a real schedule, I'm developing the cyclical analysis tool and I have to say that I was surprised from this chart brewed last Friday. It's not perfect at all, but it gives a different perspective to index forecast, totally separated from the model and artificial intelligence tools. The chart shows the Dow Jones Industrial Average (not the S&P 500, as DJIA has a much longer history) that in entering a cyclical negative phase, which does not means that the index will crash, but that, as in previous negative phases, may encounter a more "meditative" phase for next two to three months. Analysis is conducted on the DJIA historical daily data from May 1896.