Saturday, September 10, 2011

Important USDx autocorrelations

They say history has a habit of repeating itself. Similar charts to those below reinforce this as observable fact. By using mathematical self correlations of historical data, some interesting outcomes are revealed across all of the industry datasets that I follow, without exception.

One of the more powerful tools I have developed in my arsenal of analytic weaponry, is an automatic routine that creates data schedules and charts of auto-correlations (the correlation of something to itself). That is, comparing recent data to see if it has been repeated previously (or very close to it) throughout the past. This is only part of the reason why very large datasets are essential for proper long range and short range analysis. You can then revisit that history to identify what might be similar macro/micro conditions specific to a particular observed response. It refines your 'what-if' and prepares your 'if-then'.

The USDx (dollar index) is one of the more critical of the broader market indicators that I follow routinely. The USDx is now (as in today 09Sep2011) at another critical juncture in it's life that is worth sharing. I won't go into any of the technicals behind the how and why, and will assume the ready is either (a) sufficiently familiar with the terms or (b) has no intention of understanding and merely wants to see the charts.

In summary -
  1. The highest annual seasonal (Jan-Dec) correlations are all bearishon year to date (YTD)
  2. 4 out of 5 highest autocorrelations are bearish; top 3
  3. Top 10 highest correlations are evenly split bullish/bearish
  4. Singular continuation of bullish move is the 2008 August collapse
So - the results output first -
SEASONAL YTD  - data output
(exclude present year 2011 has 100% self correlation obviously)


- top 7 YTD seasonal all end the year (EOYr column) in negative territory

6month AUTO-CORRELATION - data output

- 4 out of 5 highest correlations are bearish for next 6 months

... and the correlations in graphic form - (for those who just want the pictures)
SEASONAL


MOST BULLISH


MOST BEARISH


So, what ... if ... the USDx does something here??


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