roger babson and the arrow of time

Download Roger Babson and the Arrow of Time

Post on 27-Oct-2014




5 download

Embed Size (px)


Roger Babson and the Arrow of Time

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.

Figure one is a gold chart with a peak to low line drawn.

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 future can predict the past.At this point one may ask : Why did Roger Babson develop the Action Reaction theory of Price movement? According to the Professional Techniques manual from Roger Babson was at the New York stock exchange on March 14, 1907, at the request of a friend. The market had started a drop from a high of 111 on March 6, 1907 on the way to a low point of 60. Much of the drop occurred on March 14. On that day I actually saw mens hair turn gray. Roger wrote in his autobiography. It motivated him to do a study of stock exchange transactions and what he referred to as foolish investments. He came to the conclusion that the cost to even thrifty investors was one and a half billion dollars a year at that time. At that point he made a life changing decision, to do something to prevent the losses. It put him on the path, which resulted in the founding of Babson Business Statistics, Babson Business College and the Gravity Research Foundation. Another important question is: If Roger Babson discovery that this is useful for finding times to sell and avoid losses, what about times to buy? According to research at Innovative, utilizing recent versions of precision trader software, there are ways of utilizing some of the over twenty possible center lines effectively to determine times to buy. Studies have shown that selective use of specific lines can be used in a manner that significantly lowers the risk and finds buying points very close to the extremes of the moves in securities.

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 David John Jaenisch, recently graduated from University of California, Irvine and is pursuing a PhD in Physics. He may be reached through Copyright RCS 2011 All rights reserved .permission is granted to publications to publish in full.


View more >