IEM Daily Feature
Wednesday, 03 October 2012
Wednesday, 03 October 2012
Golden and Death Crosses
Posted: 03 Oct 2012 05:28 AM
Applying trend analysis techniques often used for stock price
forecasting to weather data is an interesting venture. The featured
chart looks at "golden and death crosses". The "cross" is a reference
to the intersection of two moving average lines within a time series
plot. One line represents a short term window average and the other
is a longer term window average. The theory is that when the short
term moving average moves above or below the longer term average, the
immediate term direction of the trend continues (aka momentum). A
"golden cross" is when the short term average surpasses the longer
term average (upward momentum) and a "death cross" is the opposite
situation (downward momentum). So applying this to a time series of
daily average temperatures, we can find these cross events occurring
between a 50 day and 200 day moving average (typical periods used for
stock price analysis). The top chart shows an example of this
analysis for the recent few years. These events happen once per year
and their date of occurrence is included in the bottom two charts.
When the actual data has a preference to be on one side of the trend
line, this is called either support from going lower or resistance to
going higher. The cross events are said to denote a regime switch
between resistance and support. So within the past week we had a
"death cross" which would indicate that the near term 50 day trend
will now act as resistance and our temperatures are going lower! Of
course, we live in a physical world and statistical behaviors of
temperature are more a result of cyclical processes that play nicely
with trend analysis techniques.
Voting:
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Tags: stockmarket
Voting:
Good = 28
Bad = 12
Tags: stockmarket