This month's projections are encouraging, that is, 84.62% of the most similar charts for 4/27/2007 to 5/27/2007 are trending up for the Dow. Likewise, 61.54% for the S&P 500, 64.29% for the Russel 2000, and 100% for the Nasdaq Composite -- impressive projections. As always there's another perspective, unfortunately, it's lacking teeth.

According to Economy Crawls, Raising Recession Fears, before year end, the markets will be engulfed in a housing spillover. While reading, I wondered if quality is being sacrificed at the cost of furious content generation.

Statements from Ben Bernanke, Alan Greenspan are void of hard numbers; the scarcity of questions to these gentlemen are disappointing. For instance, from the article "Former Federal Reserve Chairman Alan Greenspan has put the chance of a recession this year at one in three." How did Mr. Greenspan arrive at this statistic? Then there is "Federal Reserve Chairman Ben Bernanke, however, has said he doesn't believe the economic expansion, now in its sixth year, is in danger of fizzling out. Neither does the Bush administration." Once again, how did Mr. Bernanke arrive at this conclusion?

This type of complexity is prevalent within the financial industry; correlating causality will illuminate retail investors -- a 6 month simulation was performed for the Dow and S&P 500, and the results are healthy. For the Dow's current 6 month price chart, 84.62% of the 13 most similar charts are trending up, likewise 76.92% for the S&P 500. Trillions of transactions, some before your time, alive once again to remind the retail investor that the markets are in good health, atleast for now.

The market is approaching fearful heights, and people are looking for signs, especially from charts, however misused. Relax, this will be short, there's no need to be wordy, we have charts.

  The other day, I burst-clcked my mouse to a doomsday scenario where many claimed a 1987 Dow chart looked similarity to 2007, Black Monday being involved made the post even more sensational. After comparing the charts from 30 years with image recognition, 1987 had no resemblence to 2007. You see, in the CHART the closest remsemblence was from 1991, which was the beggining of the bull market. From the charts discovered, 69% of the most similar charts are trending up, a significantly positive number.

Today, a tech site claims the end is near for dot-com with a price chart showing 2007 similarities to the dot-com bubble time period. I scanned 30 years for 15 of the most similar CHARTS using image analysis, and determined the current Nasdaq composite doesn't resemble the dot-com bubble charts,  ironically, the most similar chart is from the initiation of the bull market from 1993. Furthermore, there are no significant historical causality , 53% of the most similar charts are trending up, might as well flip a coin.

Stare at charts long enough, and they begin to resemble each other. Searching for similarities in charts are best left for machines.

Note:
Red price chart represents NOW, and the green price chart are the most similar from the PAST, ordered left to right from most to least similar.

SPX's performance projections are looking extraordinary from April 20th to May 20th, 2007. As you can see, the causality of the associations are 84.62%, which is saying, from 30 years of performance data this month's chart fits neatly into scenarios where there is a probability on trending positively for the month, historically. Those similar charts can be found here.

A blog entry from Bill at  Vix and More wore asbestose gloves for dealing with an entry from The Big PIcture submitted by users about a cliff diving chart from 1987 that seems similar to 2007. Being a former grunt, I hit the mouse and banged the url looking for dodgy charts.

What I saw happens all the time, stare at two images long enough, and they seem similar in some fashion.

Fortunately, image analysis can be of assistance. Before we proceed,   the red chart represents now,  and the green charts are the best matches from 30 years,  and as you can see 1987 chart pattern is nowhere on the list of similar charts for 2007.  We might as well flip a coin, there are no significant causations  from the associations. There isn't any ominous leading indicator in the tea leaves, atleast for now.

I will part with this image, stare at it, it's not an animated gif, and yes, your eyes are playing tricks on you.

Is it possible for a chart to convey 30 years of ideas as vividly as a book in seconds, but not years? Decades of financial charts are capable of this by being stimulus/response maps of a living organism through its price movement. Navigating through these sequences are similar to bioinfomatics, locating sequences that hint to causality.

Similar Charts (green) for Today (red)

Outcome of Similar Charts (green) for Today (red)

Difficulty arises when contrasting images of charts -- it requires mimicking the human eye to understand decades of charts in seconds. The merits of the implementation is staggering, causality can be instantly correlated, leading to a substantial historical perspective to compliment any analysis. It's an incredibly simple but powerful process.

Given a symbol, retrieve the most recent chart (e.g. month, year, etc.), discover similar historical charts through artificial vision, and extrapolate outcomes for correlating their causality strength.

The financial markets are the perfect genetic algorithm imitating life. Some may describe it as chaos, or a random walk, fortunately professionals consistently demonstrate there's order, whether it's via fractals, neural networks, or dow theory -- their wallets don't lie.

Based on monthly projections, the S&P 500 will need to rise further for a healthy market to take hold from April 17th to March 17th, 2007.

The performance projections for the Dow has made considerable progress from last week; most probably due to the 108 point trend reversal gain today, which wan't consistent with historical chart patterns. The current projections for the Dow consist of a strong number of up-trends, unlike the S&P 500. The strength in the market projections seem localized to large corporations, with the S&P 500 projecting near neutral trends.

The Dow's projecting a 76.92% likelihood of an up-trend based on historical chart patterns with the S&P 500 trailing at 61.54%. The health of the Dow has literally changed for the better overnight, atleast for companies that are part of the average. Unfortunately, the S&P 500 projections aren't as hard charging as required by a strong trend projection, it will need to rise further for a healthy market this month.

As a reminder, the 2007 projections for Dow and S&P 500 consist of strong up-trends, as has been reported here, since last year.

The Dow Theory, it's the standard weapon of generalization for most traders, and it's proven. Charles Dow didn't elaborate about it but his peers did, it basically identified financial chart patterns that hint at outcomes. Most are not aware, its origins didn't start with Dow, far from it, the land of its origin was Japan, from a man by the name of Munehisa Homma in the 1700s.

Born in 1724 to a wealthy family where he traded the first futures market - rice futures. Munehisa Homma, a samurai due to his uncanny trading abilities, was the prodigious inventor of technical analysis, and candlestick charts, documented in his book The Fountain of Gold - The Three Monkey Record Of Money, which contained quotes such as When all are bearish, there is cause for prices to rise. When everyone is bullish there is cause for the price to fall, the ubiquitous contrarian hymn.

Most importantly, discovered in this book was the rosetta stone for most traders -- chart patterns. You will recognize them, not by their names. These patterns are the cornerstone of technical analysis; they leaped off plateaus and engendered analytics for traders.

Then there is Edward Jones, a statistican who co-founded the Dow Jones and Company and co-invented the Dow Theory. There isn't much documented about him except being a Brown University drop-out with an inclination for numbers, he may have played a key role in introducing averages to Charles Dow, which lead to the Dow Jones Averages.

The mining barons, supposedly worth $900,000,000 in 1879 met Dow on a train to Leadville, Colorado where Dow was covering a story on mining. They may have played a key role in delivering Munehisa Homma's method on wealth preservation to Dow, it should be noted, a couple of years after his return, the Dow Theory was formed along with Dow Jones and Company.

Methods of attaining money has a way of prevailing through time, just as it may have been with Munehisa Homma. Dead men have a means of living eternally through knowledge preservation, while those doing the recording are usually the prodigies.

From correlating causality through image recognition of charts, the analytics for Dow and S&P 500 from 4/5/2007 to 5/5/2007 are reflecting weak upside.

Analysis for Dow and S&P 500

The Dow projections are historically based on 50.00% of price charts increased by 1.23% while 50.00% decreased -1.86% and the S&P 500, 57.14% of price charts increased by 1.69% while 42.86% decreased by -0.42%.

Bank of America's Correlation Crisis captivated my attention, perhaps it's the crisis in the title. Whatever the reason, the question ``We see increasing risk signals that remind us of the run- up to the 2005 correlation meltdown,'' the analysts wrote in the report titled ``The Correlation Crisis of 2007?'' initiated a quest for objective numbers, unfortunately, nothing substantial was found in the article.

For curiosity sake, I executed an analysis for several homebuilding companies (PHM,TOL,CTX,LEN), as I did several days ago, not simply seeking correlations but a correlation of causations. What happened next surprised me, I had to re-run several times to confirm -- the performance projections have degraded further, those drops in similar chart patterns weren't splits.

What I did discover through undocumented chart patterns is an average of 50% probability of ascension for homebuilder stocks (PHM,TOL,CTX,LEN) within 1 year by finding similar charts for this year through image recognition, which is very weak. Click on hyper-linked symbol for analysis.

To put the analytics in context, as it turns out 1996 was a magic year -- it's price pattern proved to be similar to 2007 from several discrete analysis (PHM,TOL,CTX,LEN). What happened in 1996? It was where housing bottomed-out or as some would say, home price appreciation began and Wallstreet was adversely affected when several japanese housing-load companies revealed 75% of their portfolios consisted of bad loans that totaled at least 77 billion dollars.

The 1996 minutes from the Federal Reserve summed it up "In this view, a level of housing construction somewhat below the peak reached earlier in 1996 was likely to be sustained, buoyed in part by the recent decline in mortgage interest rates and the continuing rise in consumer incomes and favorable consumer sentiment."

As the numbers currently project, it seems a healthy rebound is not going to occur within a year if things remain as they are, if anything, according to the charts, there will be a re-test.