Monday, April 10, 2006

If You Were Interested

Question and Answers

I have received some excellent and interesting questions from readers regarding the article “What a Wonderful World”. Instead of reply them individually; I would like share those questions and answers with everyone.

Q: “I don’t agree with you. What you described is some kind of coincidence. Even you said in your article ‘Once in a blue moon’”.
A: I would like to explain it from two angles:
1. There are some well known and well accepted relation between the weather and stock market. Because they are well reasoned, people treat them just like any other common knowledge without question.
For example, a cold winter will increase the demands of heating oil and increase the oil or gas price; then the oil price will impact the stock market very much…
And we all know a serious hurricane or winter storm would badly change our economy, and the stock market underneath…
From the above examples, we can clearly draw a line between the weather and stock market. They are strongly related and not a “coincidence”.
2. A coincidence cannot have the two characters: repeatable and predictable. In our case, we have the two. Therefore, what I described is not a “coincidence”.

Q: Does NASDAQ follow the same rules?
A: Yes, the similar rule can apply to NASDAQ also.
If you using the Closing number of NASDAQ and divided by the daily high temperature, you will get another sequence nicely. They are “41, 45, 49, 43, and 39”. It is 2 up of the sequence that we got from Dow.

Q: Why did you use daily High temperature, but not the low or both?
A: Usually the low temperature is at about 5:00 AM; the high temperature is at about 3:00 PM. Because we are using the summer time, the high temperature is at 4:00 PM New York time which is our market closing time. Therefore, I am trying to use the two data at almost the same time to ensure a more accurate result.

Q: “If the 5 is for spring, what is for summer?”
A: In fact, there are two factors for spring: 5 and 4; two for the summer: 3 and 8; two for the fall: 2 and 1; one for the winter: 6.
If you have time, you could try it yourself. I think there will be some funs.

Q: Can I use your formula to predict the market? How reliable it is?
A: Please don’t. There are a lot of factors to consider. If you try to use one factor to cover all, you just went too far.
You can definitely discover some interesting fact by summarizes the past data during certain time frame. But I am not sure how confident you will be to predict the future, unless you want to gamble.

Thank you for your support!


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