"B" on Cycles: Part III, information on the Bradley siderograph model used in market cycles analysis

Continuing with this weekend's review of different cycles methods - A little more persistence has paid off, I located more information about the siderograph model developed originally by Donald Bradley. Many are interested in the Bradley model, but I've found that Manfred Zimmel is definitely out there keeping it up. Looking back at what it showed for 2007 (see below), I can see why interest picked up in its results! This is from Manfred Zimmel's Amanita website:

The Bradley siderograph was developed in the 40ies [1940's] by Donald Bradley to forecast the stock markets (link book). Bradley assigned numerical values to certain planetary constellations for every day, and the sum is the siderograph. It was originally intended to predict the stock markets. The noted technical analyst William Eng singled out the Bradley model as the only 'excellent' Timing Indicator in his book, "Technical Analysis of Stocks, Options, and Futures" (source: Astrikos).
It is crucial to understand what the siderograph is about since almost all traders (and even and even financial astrologers!) misunderstand it. Over the decades it has been observed that the siderograph can NOT (!!!) reliably predict the direction but only turning points in the financial markets (stocks, bonds, bonds, commodities) within a time window of +/- 4 calendar days (in a few cases up to +/- 7 days). Inversions (i.e. a high instead of a low and vice versa) are quite common. Also, it is not a timing tool for short-term trends but rather for intermediate-term to longer-term trends because the turning window is rather wide.

Bradley-Siderograph Commentaries:

11/13/2008. This is the standard model for 2009 (December 2008 - January 2010):

Note - this was Zimmel's forecast for 2008 using the Bradley model:


And this was Zimmel's forecast for 2007 using the Bradley model:


More information by Zimmel at his Amanita website:

New research on the Bradley siderograph

The Bradley chart is always marked with the hint that the dates only show turning points and not polarity, i.e. a siderograph low has almost the same odds of nailing a stock market high or a low (the opposite is true for siderograph highs). Since late 2007 the same 50:50 pattern can be detected.

However, that doesn't mean that the siderograph is telling nothing about direction, even though the exact rules can only be determined with the aid of rigorous statistical testing. Since 1950 the Pearson correlation coefficient r (geo, helio, N=21.459) is at 2-3% which means that the correlation of the Bradley with the Dow Jones is zero, i.e. in general the daily direction (up or down) of the Bradley is not indicative for the stock market. The rule is that r can be between -1 and +1, with +1 meaning a perfect match and -1 a perfect inversion. Everything larger than r>0.7-0.8 (r2>0.5-0.6) is useful in principal, although one should focus on correlation coefficients of r>0.85 (r2>0.7).

However, everything depends on a moderating variable: whether the index is in a bull or bear market. Since 3/2008 r (geo, helio; N=210) = 76%, i.e. the Bradley has been quite useful in predicting the direction (up or down) of the Dow Jones. From 1/2002 until 6/2003 we had comparably emotional markets as since 2008 and the correlation was almost the same: r (geo, N=520)=78.4% and r (helio, N=520)=67.6%. In the bear market 1973-74 we saw r (geo, helio, N=701) = 0.76 and thus again in the same region. In contrast, during the calm time 6/2003 - 3/2007 we had a quite negative (!) correlation: r (geo, N=1362) = -0.43 and r (helio, N=1362) = -0.62. A negative correlation coefficient means that the siderograph and the Dow Jones tend to trade just inverted.

Somewhat exaggerated one could say: the dates of the Bradley do work regardless of the trend (bull or bear) whereas the direction of the Bradley only works in bear trends (in bull markets there is a weak bias for the stock market to do just the opposite than the Bradley). Because stock markets & commodities are both controlled by liquidity (equities are leading, commodities are following), the Bradley is getting an indicator for global liquidity in times like that and thus a indicates the direction of the stock markets in general.

How can it be explained that the market is paying more attention to astrological constellations in bad times than in good times (this observation is not restricted to the Bradley)? The more people are governed by fear (of financial losses, of economic troubles, unemployment and so on), the lower their consciousness and the lower their consciousness, the more they are governed by the constellations. In contrast, the more you are centered in yourself, the higher your consciousness and the more independent and free your become, which is true both for individuals and the crowd. Enlightenment can be defined as the theoretical condition (that may not be reached in reality) where you are only connected the divine and no longer with the stars.

The Bradley siderograph is listed as a separate menu point because it is in the center of interest of many readers....Path:
Questions on the Bradley siderograph.

Zimmel's commentaries also include a review of the effectiveness of the Bradley model results compared to actual market behavior during 2008. Readers interested in cycles prediction based on the Bradley siderograph model can obtain more information from Zimmel's Amanita website. Note too that Zimmel doesn't rely on the Bradley model exclusively, but clearly does incorporate it into his website and work. You can find prior year Bradley forecasts, and additional information at his Amanita website (links above).

I've previously commented that I didn't find the Bradley model very useful - maybe it's because I didn't get a real explanation about it when I first saw it. I wasn't aware of it during 2007, when it seemed to work very well, and the 2008 chart didn't seem to work well for me, or probably I expected too much from it during 2008 (not really knowing how to use it). Or maybe it's because of this combination of factors that Zimmel mentions. Namely, that it may work better in bear markets? But more specifically, that it's to be considered for timing rather than direction or level. Hmmm, that's actually rather similar to the cycles work from ChartsEdge! in the sense that we are to look toward those more for timing than level. (Although Mike Korell at ChartsEdge maintains that the forecast maps he produces don't invert, so that either they "work" or some other bias takes hold and they don't.)

Looking back at the forecast charts for 2007 and 2008, I think it's fair to draw this conclusion: the cycle dates weren't always "the" swing highs and lows in the equities markets. But they were indeed often important turning points, I see that. So - if we are to consider the Bradley model for the upcoming important dates signified soon, in June and July, we don't have to believe that they will be "the" swing high points as drawn onto those charts. But we can expect them to be high-probability "turning point" (reversal) dates. Note that the ones marked in bold are considered to be more important. So no matter what the market action is by the time we get there, July 14-15 looks like to be a rather important turning date or reversal time period.

I also rather like the comment by which Zimmel closes that discussion. The idea that one can (and should) develop to rise above things. The markets, with their "animal spirits" are unlikely to change reflecting the cycles of human behavior governed by emotional motivations. But if and as we develop ourselves individually, that can help us get perspective on the mass directions. And like Lao Tzu riding the bull (a story I discuss a bit at my Tao of Trading blogspot, see link at right), we can aim to avoid being dominated or crushed by market movements but rather "ride the waves".

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Note
I was about to close this post, but stumbled across a discussion at Zimmel's website about a "TAO" model that apparently was developed on top of the Bradley model. I don't see whether Zimmel has updated it since sometime during 2007. So I'll simply quote in what Zimmel states at http://www.amanita.at/Interessantes/Artikel/detail.php?id=310, and then perhaps we can track down or follow up with any more information at some later date:

10/17/07 .... Related information: the TAO Indicator by Richard Schulz

Based on the work of Donald Bradley, Richard Schulz has developed the TAO indicator that - in contrast to the siderograph invented by Bradley - does predict the direction of the stock market (up or down) with a relatively high degree of statistical reliability (chance probability P<0.01%), r="0.86" r2="0.74)">

The fact that the small cap index Russell 2000 is showing the best reaction doesn't surprise me. On the one hand, the small caps are less distorted by the PPT (Plunge Protection Team) market manipulation that is primarily acting over the SP futures. On the other hand, the small caps are a preferred playground for small investors and thus react more to the changes in crowd sentiment; the big boys are often not allowed to be exposed much to the small issues. Now the explanations by Richard Schulz, somewhat modified by myself:

Stock prices and astrological aspects are two independent variables, which qualifies them for a Pearson product-moment correlation study. I have modified Bradley's work:

1) I use a specific, uniform aspectarian for each planetary aspect. It doesn't matter whether it's Venus trine Saturn or Mars trine Jupiter- both trines receive the same positive value. The aspectarian is based upon a scientific formulation which sums harmonics and creates a zeroed oscillator.
2) I weight the various planetary aspects with a factor between 0.00 and 1.00. Mars in aspect to Jupiter has much more quantitative influence than Venus in aspect to Pluto. These weights are also specific and quantified.
3) I mathematically sum these weighted totals twice each week.
4) Then I take these biweekly totals and apply mathematical moving averages and summations to them. The major end result is the TAO (technical aspect oscillator). As a psychological indicator, when the TAO is positive and rising, people's attitudes and outlook are the most optimistic. When the TAO is negative and falling, the attitudes are the most negative.
5) I then correlate the stock indices with the TAO using the Pearson Product-Moment Correlation test. After this test is run, the result is the Pearson r, a value between -1.00 and +1.00. If the Pearson r is close to +1.00, then there is nearly a perfect correlation between the two variables. I get the following correlations for the TAO average (N=692): Dow Jones r=+0.73; S&P 500 r=+0.69, and Russell 2000 r=+0.86 (the quick TAO is considerably weaker). These Pearson r values are highly significant to a greater than 1 in 10,000 chance against being a random distribution. This demonstrates, mathematically, that it is very likely that the TAO is interrelated with stock market prices.

It is to be noted, however, that correlation is not causation. The correlation between the TAO and equity prices is just one useful observation among many. The stock market has, can and will move against the TAO for extended periods of time.

Current interpretation: the TAO is bullish from September through November 2007.

Well! As I sated, this "TAO" model is new to me, and I don't know that I'll be able to dig up any more information on it this weekend. So perhaps, more research and information on that, to follow at a later date.