[Part 2] The hidden language of the stock market

It’s week two documenting our overnight 17-year success (or failure) story of predicting future stock prices. Here’s a link to week one to get you up to speed: Part 1

Have you ever been in a room full of dissenters?

You know…the people you bounce ideas off of, and they immediately tell you how it won’t work.

“You’ll never get that job.”

“You can’t beat the market,” they say.

“There’s no way she’ll go out with you.”

You can always tell who the malcontents are…they tend to focus on the words “can’t, no, never, won’t.”

They always have an opinion on how you should lead your life, but their own life is a train wreck. Armchair quarterbacks I call ‘em.

I had friends like that in college.

“Had” is the key word because I only surround myself with people that bring me up…not down.

Who needs to drag around an anchor right?

You can pick your friends, but not your family…so I was a little hesitant to answer what I’ve been working on when we went over to the in-law’s house for Mother’s Day.

“We’re building a supercomputer in a Podunk town east of Fresno that predicts future stock prices,” I said.

“Wow, that’s cool. Tell me more.”

I was waiting for dissent, but instead found fascination.

So I told them the story of how I was inspired by the Shazam music app to predict future stock prices.

It didn’t have to go too far into the story before Jackie’s brother-in-law had the “ah-ha” moment…

“If you can buy the top forecast stocks, then you might be able to make a lot of money.”

“Yup.”

Long story short, I went on to tell him about our breakthrough last week.

Lean in and I’ll tell you too…

So my programming guru, Ruud, figured out rather quickly how to spool up to 45,000 computer cores on Microsoft’s cloud…

…at a cost of $4500 per hour.

That’s overkill, but we ended up building a supercomputer with the potential for a thousand times more speed.

Now our compute time has gone from months to minutes.

Here’s where reading to this point becomes as handy as a braille bible to a blind preacher.

We were trying to make sense of the data, and Ruud created a chart that made me forget to breathe for a moment when I realized what it meant.

 

 

What those weird spikes on the graph represented were suddenly clear as glass.

We discovered the hidden language of the stock market.

Something those Fibonacci ratios I learned about in the 90’s promised, but failed to deliver.

0.618…0.382…etc…etc. As useless as a steam engine without water…and this simple chart reinforced it.

Yup, there are support and resistance levels in the stock market that price bounces off of, but they aren’t Fibonacci.

It didn’t take long before I realized that in order for stocks to be predictable, there must be spikes in the data.

If there aren’t spikes, we might as well pack up our gear and head to greener pastures.

They say that when one door closes, another opens.

In this case, when a door opens, a bunch more open…and the murky gates to BS Land are slammed shut for good.

Until next time…

Continue reading Part 3

Trade smart,

 

Dan “Prince of Proof” Murphy