Second Fractal Nonlinearity

Why did significant one day crashes occur on 19 Oct 1987 and on 6 May 2010? What news precipitated these events? The explanation of Fractal Macroeconomics is that both occurred in the terminal 2x to 2.5x window of second fractals, when nonlinear price devaluations can occur in saturated oversold markets. 1929 to 1932 occurred at the end of a US hegemonic 90 year second fractal occurring as a 36/90 year series starting in 1807.

Currently, this is year 31 of a 13/31-33 year 1982 first and second fractal series and day 113-114 (for the SPX and DAX respectively) of a 56/112-140 day October 2023 first and second fractal series. The system is in the terminal 2x to 2.5x second fractal windows. For the Wilshire 25 June 2024 did not exceed its 18 June 2024 nominal peak but did serve as a secondary near peak valuation of a 8/24/22 month fractal growth series from the March 2020 low.

The asset debt system is in the 2x to 2.5x time window of both the 1982 and Oct 2023 second fractal nonlinearity.

Will there be an incipient (and AI propelled) flash crash?

US total market cap to GDP ratio was at 192.2 % on 24 June 2024, still 7% below its 2021 199.5% peak.

Since 2020 profoundly and historically aberrationally high deficit borrowing and spending (as a % of GDP) by central banks, governmental, and private sources – has produced relatively so little GDP.

Expect the unexpected.

Copper, the global useful building element commodity is following the same March 2020 monthly fractal pathway as the German Dax : 8-9/24/22 months. The 24 month second fractal is composed of a 4/9/8/6 exactly paralleling the German Dax.

The weekly German Dax from the low in October 2023 is composed of two fractal series: an initial 3/6/6 of 13 week first fractal series and a 5/10/10/1 of 7 week or 29 week second fractal series. This should end in about the last wee of July 2024.

With weakening economic data, the European and Canadian central banks have already lowered sovereign interest rates. A significant July 2024 drop in global equities will likely precipitate another round of central bank interest rate cuts and an initial Federal Reserve Fed Funds rate cut. A third fractal rebound of about 23-24 weeks would take equity growth beyond the United States early November 2024 presidential election.

Interpolated within the US hegemonic 1807 36/90/90/54 year X/2.5x/2.5x/1.5x fractal series, is an expected 1982 13/32 year second fractal nonlinear crash. The US ten year note has been inverted with the 3 month treasury for 570 days close to the 600 days in 1928 and 1929. A major recession is on the horizon.

Gold in USD has reached a March 2001 51/128/102 month :: x/2.5x/2x perfect growth fractal.

So much distortion of normal money expansion and debt expansion was caused by the 2020 global central banking QE/money printing response to the world-wide pandemic. Over two years 4.7 trillion dollars were created outright and placed on the Fed’s balance sheet. The MBS program with its 2.5-3% mortgages added (inflated) within two years an extra 100,000 dollars to the value of a US residential or 14 trillion dollars for the 140 million US residentials. There is an effort by the central bank to facilitate second mortgages so that newly inflated wealth can be extracted.

While within the asset debt macroeconomic system , fractals self organize into the two basic patterns of x/2-2.5x/2-2.5x/1.5-1.6x and x/2-2.5x/2-2.5x, the distortion of unprecedented QE in response to covid caused a like distortion in the the length for western equities of the March 2020 low second fractal.

Fractal units are determined by nadir valuation slope lines.

The German Dax is a representative example of Western equities. The first fractal of 33 weeks is defined by a line connecting the lows of week 1 and week 33. The 33 weeks is composed of two fractal units of the basic two patterns defined above: 3/7/8/5 weeks and 3/7/6 weeks. The second fractal is defined by a line connecting the low of week 33 and the low of week 133 and follows a 14/35/34/21 week fractal pattern ::x/2.5x/2.5x/1.5x. All intervening values are above this line. The length of the second fractal determines the ideal base and the length of third fractal growth as 2x’ to 2.5x’ or 80/81 to 101 weeks. The third fractal which is ongoing and has an underlying nadir slope line from week 133 to currently week 223. 4 fractal subunits are identifiable in the third fractal: 5/10/12 weeks; 5/13/10/8 weeks; 3/6/6 weeks; and 5/10/7 of 9-10 weeks which will likely be the final peak valuation or secondary peak valuation.

A DAX valuation crash over the ensuing 6-7 weeks would then be fractally appropriate. Commodity prices will likewise fall precipitously.

The inverted yield curve will rapidly uninvert as the central bank provides liquidity and rapidly lowers interest rates in the environment of falling equity and commodity prices with anticipatory expected deflation of the CPI.