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.
Category: contour
The Bubble Index Contour: TNX
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!
Geometric Brownian Trajectory Contour
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
The Bubbles of 1720
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:
Bitcoin Update: The Bubble Contour
Below is the output of The Bubble Contour: Bitcoin (BITSTAMPUSD).
The Bubble Contour Map
This is how I imagine the future of The Bubble Index. Instead of producing multiple indices for each window (52 days, 153 days, 256 days, etc…), a contour map will be generated which shows the entire spectrum of windows in a single graphic, evolving through time. As an example I have produced this contour map of Tesla (TSLA) from 2011-02-04 to 2014-08-29. Also, check out the Gold map below Tesla. I will update the Gold map as I calculate more data.