The images in this post were obtained from The Bubble Index Contour: S&P 500 (1985 – 1990). The software used is 3DField. As you can see from the vertical black line drawn on the two contour maps, Black Monday, October 19, 1987 occurred near a mountain peak in the contour graph.
I found a website, 3dfmaps.com which has the perfect software, called 3DField which creates great 3D contour maps. This is the next to step in displaying the results obtained with The Bubble Index. It is very exciting to use this software to display these contours! Hopefully, this improved visual aid will allow better monitoring and prediction of market movements.
The Bubble Index Contour of the Standard and Poor’s 500 Index since 1950. There is a lot going on in this graph! My biggest concern is at the top of the graph. Looks like something big. I will have the DJIA from 1871 completed in about a month. That should clarify.
After working on the contour map code and running TNX through the algorithm, I can now show you how I want you to think about the relationship between fractal geometry, LPPL Oscillations, and financial time series. With windows ranging from 52 days to 13,000 days, the output of The Bubble Index Contour for TNX (CBOE 10-Year Interest Rate) shows some interesting features currently in the process of development.
You can see that there is a growing bubble centred around the 9,000 day window; also, a sort of harmonic bubble around the 4,500 day window. This will be of immense importance in the upcoming months. Bill Gross has said bonds are safe in the short term, but watch out for long term; Martin Armstrong has been calling for 2015.75 to be a crucial phase transition in bonds worldwide.
Keep an eye on this TNX contour plot as that date approaches. (NOTE: As you can see from the plot, it contains artefacts along the diagonal due to interpolation over the grid of data. As there is not enough time to calculate every individual window, I had to calculate the windows in intervals. I will update this graph as I obtain more closely spaced intervals.) Credit and thanks goes to the bigmemory package and fread functions in R!
As a test case for The Bubble Index Contour, I fed it a simple geometric Brownian trajectory. You can see from the contour graph that there are many signals produced. And they are all weak signals with the peaks never exceeding more than 60 in value. It is interesting to compare these results to previous examples: such as Tesla, Bitcoin, and The Bubbles of 1720. In these examples, The Bubble Index reaches much larger magnitudes (typically in the 1,000s) and there is a visually simple structure. The structures seen in Tesla, Bitcoin, and The Bubbles of 1720 have common features. On the other hand, the Geometric Brownian Contour has somewhat irregular patterns. My hunch is that asset prices generated by networks of human traders are far from random and in fact have much in common with Prigogine’s idea of time irreversibility through correlation formation in a network.
As a side note, the range of the geometric price path is 89 to 250.
Download The Bubble Index Contour: Geometric Brownian Trajectory
American stock data from 1871 to 1937; obtained from Common-Stock Indexes 2nd edition by Alfred Cowles 3rd and Associates.
The American stock market appears to be at a critical juncture. On the one hand, various trading blogs such as the ELLIOTT WAVE lives on, suggest a continuation of a Primary 5 Wave Impulse up-trend in place since the 2009 low. Other Elliott Wave traders, like Daneric’s Elliott Waves, place the current up-trend as a B Wave rebound from the 2008-9 A Wave correction. In a previous post I mentioned the connection between The Bubble Index and Anthony Caldaro’s EWC. In this post I suggest a connection with Daneric’s EWC. The graphs below show this connection with The Bubble Index: DJIA. I neither agree nor disagree with Caldaro/Daneric. The comparison is presented here for comment.
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| Graph 1. The Bubble Index: DJIA (5,040 Days) with Daneric’s EWC |
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| Graph 2. The Bubble Index: DJIA (10,080 Days) with Daneric’s EWC |
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| Graph 3. The Bubble Index: DJIA (20,160 Days) with Daneric’s EWC |
The Vienna stock market crash of 1873 would provide an excellent source of price data to test The Bubble Index. Below you will find a summary result of the crash found in The Parliamentary Papers: House of Commons and Command, Volume 67 (pgs. 1216-7). Unfortunately, the full data does not seem readily available in one source. It seems that the price data is scattered across various German/Austrian finance journals and other non-florin based texts like The Economist (pounds sterling). It would be richly rewarding to find that the price data has survived two world wars. In my free time I will try to piece together all the quotes from various listed companies on the Vienna Stock Exchange during the period of 1865 – 1875. This should provide additional research material to study the formation of stock bubbles and crashes. No promises…
| Name | March 1873 – Capital Paid up, per share | Paid in Capital Units | Share Price on 15th March 1873 (florins) | Price on 31st December 1873 (florins) | December 1873 – Capital Paid up, per share | Nominal Price change (March – December 1873) | % change (March – December 1873) |
| Anglo-Austrian Bank | 120 | silver | 317 | 132 | 120 | -185 | -58.36% |
| Austro-Egyptian Bank | 80 | silver | 176 | 101 | 80 | -75 | -42.61% |
| Austro-Ottoman Bank | 80 | silver | 136 | 55 | 80 | -81 | -59.56% |
| Austro-Turkish Bank | 80 | silver | 130 | 26 | 80 | -104 | -80.00% |
| General Building Society | 80 | currency | 276 | 54 | 160 | -222 | -80.43% |
| Vienna Building Society | 100 | currency | 308 | 76 | 100 | -232 | -75.32% |
| Moneychangers’ Building Bank | 40 | currency | 77 | 8 | 40 | -69 | -89.61% |
| Leopoldstadt Building Society | 100 | currency | 118 | 24 | 100 | -94 | -79.66% |
| Military Building Society | 100 | currency | 130 | 30 | 100 | -100 | -76.92% |
| Lower Austrian Building Society | 100 | currency | 118 | 15 | 100 | -103 | -87.29% |
| Styrian Building Society | 40 | currency | 55 | 16 | 50 | -39 | -70.91% |
| Building Shares Society | 80 | currency | 153 | 8 | 80 | -145 | -94.77% |
| Trieste Building Society | 50 | currency | 53 | 30 | 50 | -23 | -43.40% |
| Building and Rental Society | 100 | currency | 131 | 26 | 100 | -105 | -80.15% |
| Bank for Building and Communication | 80 | currency | 124 | 20 | 80 | -104 | -83.87% |
| Baden and Vocslau Building Society | 40 | currency | 90 | 5 | 60 | -85 | -94.44% |
| Bank of Exchange Operations | 200 | currency | 290 | 32 | 200 | -258 | -88.97% |
| Stock Exchange Bank for Arbitrations | 200 | currency | 285 | 1 | 200 | -284 | -99.65% |
| Stock Exchange Credit Bank | 80 | currency | 181 | 1 | 80 | -180 | -99.45% |
| Stock Moneychangers’ Bank | 200 | currency | 220 | 0 | 200 | -220 | -100.00% |
| Bank for Association of Capital | 200 | currency | 318 | 10 | 200 | -308 | -96.86% |
| Central Mortgage Bank | 80 | currency | 126 | 0 | 80 | -126 | -100.00% |
| Vienna Commission Bank | 200 | currency | 219 | 0 | 200 | -219 | -100.00% |
| Vienna Commercial Bank | 80 | currency | 167 | 15 | 80 | -152 | -91.02% |
| Credit Bank | 160 | currency | 340 | 237 | 160 | -103 | -30.29% |
| Vienna Credit Bank | 200 | currency | 270 | 96 | 200 | -174 | -64.44% |
| Deposit Bank | 80 | currency | 123 | 0 | 80 | -123 | -100.00% |
| Domus Bank | 100 | currency | 112 | 0 | 100 | -112 | -100.00% |
| Danube Stream Navigation Company | 525 | currency | 700 | 514 | 525 | -186 | -26.57% |
| Securities Bank | 200 | currency | 256 | 0 | 200 | -256 | -100.00% |
| Lower Austrian Discount Company | 500 | currency | 1165 | 885 | 500 | -280 | -24.03% |
| Franco-Austrian Bank | 80 | currency | 150 | 29 | 80 | -121 | -80.67% |
| Trading Bank | 200 | currency | 320 | 60 | 200 | -260 | -81.25% |
| Hypothecated Rental Bank | 80 | currency | 278 | 11 | 100 | -267 | -96.04% |
| Industrial Bank | 100 | currency | 130 | 5 | 100 | -125 | -96.15% |
| Industrial and Mortgage Credit Bank | 80 | currency | 144 | 19 | 100 | -125 | -86.81% |
| Italian Austrian Bank | 80 | currency | 205 | 30 | 80 | -175 | -85.37% |
| Leopoldstadt Bank | 200 | currency | 232 | 50 | 200 | -182 | -78.45% |
| Lombard Association Bank | 200 | currency | 275 | 63 | 200 | -212 | -77.09% |
| Provincial Bank Association | 140 | currency | 203 | 103 | 200 | -100 | -49.26% |
| National Bank Association | 500 | currency | 983 | 1026 | 500 | 43 | 4.37% |
| Austrian General Bank | 200 | currency | 375 | 34 | 200 | -341 | -90.93% |
| Intervention Bank | 80 | currency | 145 | 35 | 80 | -110 | -75.86% |
| Prague Banking Association | 80 | currency | 129 | 36 | 80 | -93 | -72.09% |
| Installments and Rentals Bank | 120 | currency | 123 | 30 | 120 | -93 | -75.61% |
| Estates Bank | 100 | currency | 136 | 15 | 100 | -121 | -88.97% |
| Maritime Commercial Bank | 80 | currency | 105 | 32 | 80 | -73 | -69.52% |
| Savings and Lombard Bank | 200 | currency | 230 | 20 | 200 | -210 | -91.30% |
| Union Bank | 200 | currency | 253 | 107 | 200 | -146 | -57.71% |
| Association Bank | 80 | currency | 216 | 16 | 80 | -200 | -92.59% |
| Trading Association | 200 | currency | 228 | 110 | 200 | -118 | -51.75% |
| Vienna Banking Association | 80 | currency | 402 | 60 | 80 | -342 | -85.07% |
| Vienna Stock Exchange Bank | 80 | currency | 236 | 0 | 80 | -236 | -100.00% |
| Vienna Moneychangers’ Office Bank | 80 | currency | 265 | 0 | 80 | -265 | -100.00% |
| Vienna Change Bank | 80 | currency | 321 | 0 | 80 | -321 | -100.00% |
| Vienna Change Association | 80 | currency | 231 | 76 | 80 | -155 | -67.10% |
| Elbemuhl Paper Manufacturing Company | 100 | currency | 127 | 60 | 100 | -67 | -52.76% |
| Inneberg Iron Works | 180 | currency | 351 | 175 | 200 | -176 | -50.14% |
| Wienerberg Brick Kiln Company | 120 | currency | 265 | 130 | 120 | -135 | -50.94% |
| Lower Austrian Building Association | 80 | currency | 118 | 24 | 80 | -94 | -79.66% |
| Union Building Society | 80 | currency | 174 | 44 | 80 | -130 | -74.71% |
| Vienna Building Society | 60 | currency | 128 | 24 | 70 | -104 | -81.25% |
| Vienna Parceling Building Society | 100 | currency | 174 | 21 | 100 | -153 | -87.93% |
| Tramway Building Society | 100 | currency | 161 | 46 | 100 | -115 | -71.43% |
| Mountain Railway Company | 100 | currency | 258 | 28 | 100 | -230 | -89.15% |
| Francis Joseph Railway | 200 | silver | 224 | 211 | -13 | -5.80% | |
| Charles Louis Railway | 210 | currency | 225 | 225 | 0 | 0.00% | |
| Elizabeth Railway | 210 | currency | 246 | 221 | -25 | -10.16% | |
| Crown Prince Rudolf Railway | 200 | silver | 170 | 156 | -14 | -8.24% | |
| Northern Railway | 1050 | currency | 2280 | 2100 | -180 | -7.89% | |
| Southern Railway | 200 | silver | 186 | 167 | -19 | -10.22% | |
| North-West Railway | 200 | silver | 217 | 194 | -23 | -10.60% | |
| Hungarian North-East Railway | 200 | silver | 156 | 98 | -58 | -37.18% | |
| Hungarian East Railway | 200 | silver | 132 | 40 | -92 | -69.70% | |
| Hungarian Western Railway | 200 | silver | 173 | 132 | -41 | -23.70% | |
| Kaschau-Oderberg Railway | 200 | silver | 174 | 134 | -40 | -22.99% | |
| Lemberg-Czernowitz Railway | 200 | silver | 152 | 130 | -22 | -14.47% | |
| Transylvania Railway | 200 | silver | 175 | 152 | -23 | -13.14% | |
| States Railway | 200 | silver | 332 | 339 | 7 | 2.11% | |
| Theiss Railway | 200 | silver | 242 | 195 | -47 | -19.42% | |
| Tramway Company | 200 | currency | 358 | 154 | -204 | -56.98% | |
| Omnibus Company | 100 | currency | 138 | 42 | -96 | -69.57% | |
| Average % Change | -65.61% | ||||||
| Source:Parliamentary Papers, House of Commons and Command, Volume 67; pages 1216 – 1217 | Average % Change – Railways | -16.76% | |||||
| Average % Change Excluding Railways | -76.54% |
I recently read an article which compared the inflation adjusted value of the Dutch East India Company (VOC) to modern mega-corporations today. The peak inflation adjusted value of VOC was calculated to be around $7 trillion USD!! Quite ridiculous… Indeed, so I wanted to analyze the price data of VOC with The Bubble Index. Thanks to the prices found by L.O. Petram here, the graphs below were produced (meaningful graphs are the 1764, 2520, 5040, and 10080 day indices).
It is noteworthy to point out that the 10,080 Day index peaked on November 13, 1648 — approximately six months after the Peace of Münster was signed. The independence of the United Netherlands from the Spanish Crown occurred at a peak in the stock price of VOC and was followed by a large correction in subsequent years.
The bubbles of 1720 are frequently mentioned and well known. These include the stocks of the South Sea Company, the Mississippi Company, the Dutch West India Company, and the Old East India Company. With data obtained via the Yale School of Management’s South Seas Bubble 1720 Project, The Bubble Index has created the following graphs: