Haha, Hoho and Huhu debated on Dow Jones’ prediction*

- A novel style of a sample for using U-Predict stock ruler

J. K. Gao, April 14, 2007

Three stock traders, Haha, Hoho and Huhu, met on a week end. Exactly to
say that was on Saturday, April 6, 2007. They debated on the trend of the US
stock market with individual’s opinions. Haha has a bearish attitude towards
the stock market. He felt that the stock market was unfavorable recently,
such that oil price soaring, world market unstableness, and a sudden drop of
US stock market few weeks ago, especially after Mr. Alan Greenspan’s
recent Hong Kong talk that US could be in a recession by the end of this
year that plunged 416-point of Dow Jones. He felt that there might be some
other news to come expectedly in the next week that could cause the shifting
force further to a negative direction. However, Huhu has a bullish view
towards the market based on his observation of the slowly climbing of the
economy this year and increased job hiring opportunity. He felt that the
market was favorable and he expected there might be some other favorable
news next week that could increase the strength of a positive shifting force.
Another gentleman Mr. Hoho disagreed with those two kinds of forecasts.
He felt that neither Mr. Haha’s nor Huhu’s point of view could be acceptable
to him. His opinion about the current market was neither a bearish one nor a
bullish one. He thought that the negative force and the positive force had just
been balanced and he did not expect that there might be either good news or
bad news would come for the next week. So, his feeling was that the market
will keep neutral and no major shifting force would change the direction of
the current sailing angle of the ship. And all of those three persons could not
give out practical figures or even the approximate points of Dow Jones
industrial average for the next week.

So, they decided to try to use the U-Predict stock ruler, which was described
in the book “Prediction of Gao’s Equation” and Article 20 posted on
scribd.com by the author, to see what would be the calculator to say. To
solve their differences, each person needs to select one grade of stock
strength out of total nine grades of possible choices based on “Feng Shi” and
“Ba Gua”, the balancing of the negative force “Yin” and the positive force
“Yang”. Mr. Haha selected the grade 6 (i.e. the market was shifting to a
direction towards favorable) as his speculation of the next week’s market for
Dow Jones industrial average. Mr. Hoho selected grade 5, the neutral
market, as his speculation of the next week’s market for Dow Jones
industrial average. And Mr. Huhu had his own reason to select grade 4, - an
unfavorable market as we mentioned above already. Now, we can see what
would be the differences for the results according to their different grade
selections.

First, they opened a web site with a chart of 50-week moving average in a
year. There were lots of such kinds of stock chart on the internet for free.
They randomly selected the chart offered by TD Ameritrade. Mr. Haha tried
first. He searched the market close on the Friday, the April 6, 2007 and
found that Dow Jones’s closing points on that day was 12,560. There was a
50 weeks’ moving average curve on the chart. But, it was plotted roughly.
For the accurate reason he wrote down all 51 week closing points for Dow
Jones. Added the 50 consecutive closing points of the day and before that
day and then divided them by 50. He got the fifty weeks’ average for April 6.
That was 11,325. He also found the Dow Jones’ points at 50th weeks by
counting back. It was 11,367. And the 51st week’s counting back was
11,348. Then, Mr. Haha began to use the U-Predict stock ruler and the sheet
for calculation according to the instruction described in the author’s article
No. 20 posted on scribd.com to do the job.

http://www.scribd.com/doc/29615/Could-a-stock-ruler-help-you-forecasting-
Dow-Jones

For prediction of Dow Jones’ presumed points at the end of April 13, 2007,
Mr. Haha had to base on those figures. He (whose selection of the grade was
6) filled grade No. 6 in column I line 1, 2 and 3. Then, he operated at the
ruler and found a green arrow head. He let the arrow point to “6” along the
bottom frame of the horizontal small window on the sleeve. There were
three figures appearing by the side of U (upper limit) M (middle point), and
L (bottom limit) over the green background. He filled U, M, L three letters in
column II, line 1, 2 and 3 and he filled 0.058, 0.036 and 0.018 in three green
grids in the column III lines 1, 2 and 3 separately. After that, he added the
Dow Jones’ points of that day’s market closing (12,560) into three green
grids in the fourth column. Then, he found out the closing points of the
previous 50th day (that was counted backward from today) and filled 11,367
in three green grids in the fifth column. He also found out the closing points
of the previous 51st day (that was counted backward from April 6) and filled
11,348 in three pink grids in the sixth column. For filling the column VII,
Mr. Haha had to add the last fifty days’ market closing points together and
divide the sum by 50. The 1/50 of that amount (the 50-day moving average)
was 11325. So, he filled 1/5 of that moving average 2,663 (11,325/5 =
2,663) in three yellow grids in the seventh column (1/5 is a factor required to
treat a 50-day moving average).

For calculation, Mr. Haha had to compare the grid C3L1g with grid C3L1p.
Select the grid that contains a figure. That figure multiplies a number (taken
from grid C7L1y). In the first lane in the eighth column, he had to fill the
result in one of two grids (grid C8L1g or grid C8L1p). That had to match the
background color with the grid in column III, i.e. the grid in the eighth
column and the grid of the third column should match their colors. He
picked the green grid 0.058 x 2,663 = 155 to fill it in the green grid of line 1
of column VIII, 0.036 x 2,663 = 96 to the green grid of line 2 of column
VIII, and 0.018 x 2,663 = 48 to the green grid of line 3 of column VIII.

Finally he had to add three figures together and minus two figures: (C4L1g
+ C5L1g + C8L1g) - (C6L1p + C8L1p). So, he filled in the result in the
green grid C9L1g with 12,734; to C9L2g with 12,675 and to C9L3g with
12,627. Those three figures showed that Mr. Haha’s prediction of the market
closing points of Dow Jones on April 13 was 12,675 and the upper and
lower limits of the week were 12,734 and 12,627.

By repeating those similar procedures run by Mr. Haha the second person
Mr. Hoho, whose grade selection was 5, got his prediction of the market
closing points for April 13 as well. That was 12,579, with the upper and
lower limits 12,627 and 12,531.

And by repeating those similar procedures run by Mr. Haha the third person
Mr. Huhu, whose grade selection was 4, got his prediction of the market
closing points for April 13 finally. That was 12,483, with the upper and
lower limits 12,531 and 12,424.

It was until yesterday, the April 13, 2007, the three person got together to
watch the real market closing points of Dow Jones industrial average index.
That was 12,612, with high and low of 12,615 and 12426.

By comparing three traders’ prediction results, we can conclude that Mr.

Hoho is most accurate in prediction. Astonishingly, his deviation was only
-0.12%, or, about one thousandth different in compared with the real Dow
Jones points, while Mr. Haha had over estimated 0.5 % , and Mr. Haha had
under-estimated -1.02%.

It seems that the U-Predict stock ruler may help traders to predict Dow Jones
industrial average or it may also fit to the prediction of other indexes. But,
the selection of the grade shall be of critical to them.

*This is not a true story. It is a model for how to operate the U-Predict Stock
ruler, which is described in a previous article by the author. See URL at

http://www.scribd.com/doc/29615/Could-a-stock-ruler-help-you-forecasting-
Dow-Jones

or, in the book “Prediction of stocks with Gao’s Equation”. Refer to the URL
below.

http://www.lulu.com/content/73939

Warning: The author shall not liable to any traders for using the U-Predict
Stock ruler and related working table a tools in predict real Dow Jones or
other stocks in their trading.