5 January 2006 

The Alignment of Debt and Equity Market Fractals...

All tradable entities follow fractal patterns. The debt
markets, which are substantially larger than the equity markets, are no
exception. From the June 2005 low, TYX, the 30 year bond, has followed a
three phase growth pattern of 19/48/46 days with a secondary top on day
48 for a x/2.5x/2.5x fractally perfect maximal growth pattern. The valuations
of the 30 year bond and 10 year note, TYX and TNX respectively, directly
relate to the interest rate yields. In general more competition and more money
directed at  debt instruments drive interest rates lower.

The third fractal growth period  of 48 days for both the TYX and TNX
patterns started a new fractal pattern of 16/39/32 of 32-40 maximal
days with and an expected lowering of interest rates after this final
32-40 third fractal period.  Interesting the final fractal pattern of
the short term treasuries whose yield is within 0.5 percent of the 30
year bond is 13/32/26 of 26 -32. The short and long term interest rate
fractals, in spite of different base periods of 13 and 16 days
respectively, have completed  x/2.5x/2x on exactly the same day.
Interest rates for short term treasuries from a fractal vantage point
are also likely to hereafter fall, in spite of the ubiquitous news of
a few more rate increases.

The recent 2-3 day rally for the Wilshire puts the equities at a
11-12/29-30/18-19 of 18-22 day sequence.  Interestingly 18-20 days is
a Fibonacci (1.6) ratio of the 11-12 day base.
Both the debt market and the equity market are potentially aligned for
something big.

There were 50 trading days from the 1929 peak to its primary first
fractal low . With yesterday's high for the Wilshire there is a
possible, as improbable as it seems, top to bottom primary drop
sequence of 10 or so trading days.  The subsequent fractal devolution
in 1929 took 32 months. By simple proportion, the subsequent
devolution in 2006 could occur in 1/5 or less as many months.  This
would roughly match gold's potential low in 4-6 months.

Gary Lammert