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By Ron Jaenisch and David John Jaenisch Roger Babson is well known for applying the laws of physics, over one hundred years ago to forecast future price movement in securities and indices. This brings some to wonder if Roger Babsons techniques could be used to prove the arrow of time concept. For Physicists there are two questions. 1) Can the future be accurately predicted by the past. 2) Can the past be accurately predicted by the Future?
According to Wikopedia
Psychological time is, in part, the cataloguing of ever increasing items of memory from continuous changes in perception. In other words, things we remember make up the past, while the future consists of those events that cannot be remembered. The ancient method of comparing unique events to generalized repeating events such as the apparent movement of the sun, moon, and stars provided a convenient grid work to accomplish this. The consistent increase in memory volume creates a mental arrow of time. Storing a memory, from an information theoretic perspective, requires an increase in entropy, thus the perceptual arrow ultimately follows from the thermodynamic arrow.
A related mental arrow arises because one has the sense that one's perception is a continuous movement from the known (Past) to the unknown (Future). Anticipating the unknown forms the psychological future which always seems to be something one is moving towards, but, like a projection in a mirror, it makes what is actually already a part of memory, such as desires, dreams, and hopes, seem ahead of the observer. The association of "behind = past" and "ahead = future" is itself culturally determined. For example, the Chinese and the Aymara people both associate "ahead = past" and "behind = future".[8] In Chinese, for instance, the term "the day after tomorrow" literally means "behind day" while "the day before yesterday" is referred to as "front day" and in Hindi (an Indian language), the term used for "tomorrow" and "yesterday" is the same.
As one considers the Arrow of Time theory there are two straightforward questions. Can the future be accurately predicted by the past and can the past be accurately predicted by the Future? Roger Babson gave us the answer almost 100 years ago. In order to forecast the location of future reaction points in price movement he would first draw a center or normal line.
Thereafter, from prior low chart points action lines are drawn that are parallel to the Peak to Low Center line. Of the over twenty types of center lines, this type of a center line has been shown to be one of the least effective center line for price prediction. Step Three is to draw a parallel reaction in the future to see where the future reaction points would be. Roger, believed that this demonstrated Newtons third law of motion.
In Figure #3 multiple action lines are drawn. They are all labeled and parallel to the center line.
Figure 4 is the same gold chart with the data converted to a weekly format. As one can see the reaction lines came in where prices made various high pivots. The Reaction lines are equal and opposite to the Action lines when the Center line is used. With figure 4 one can see that the Action lines may be drawn last. The action points can be found by drawing the center line and the reaction lines first. This would appear to prove the Arrow of Time theory.
The above weekly S&P chart is noted to have coincidently found the low on the massive down market day in the S&P 500, when the stock market reopened after September 11 2011.
Use of weekly charts results in extreme risk. Above is a daily chart that was published on August 9, 2011 by Andrewscourse .com, to guess the low. This has been found to be an important step in the right direction.
Above is a 15 minute Treasury Bond Chart where the lines have been applied. With this type of accuracy Roger Babsons dream of being able to help investors to save billions in foolish investments, may be realized.
Ron Jaenisch, lives in San Diego and his email address is RonJaenisch@gmail.com. David John Jaenisch, recently graduated from University of California, Irvine and is pursuing a PhD in Physics. He may be reached through DavidJaenisch@hotmail.com Copyright RCS 2011 All rights reserved .permission is granted to publications to publish in full.