Financial issues: loans, mortgage, investment

Although the inflation-adjusted long-term distributions show that prices spend much more time at lower levels, there is a tendency to consider the average price of a market as the midpoint between the highest and lowest prices. Using the gold example, the midpoint for 1979 to 1993 was $451. The average of all monthly prices will give a reasonable approximation of a normal price; however, the best measure is the median, or middle, value when all monthly prices are sorted from high to low. The median value for gold over the same period was $381. If we look back at earlier posts we find that skewness is measured as the difference between the mean and the median, as a percentage of the standard deviation. In this case, the difference of $70 is a very large value, indicating a distribution with a peak far to the left of center. For price distributions, the median is a much more useful value than the average, although not as convenient to calculate. The median naturally adjusts for the skewness in the price patterns.

A trade that lasts from 1 to 3 days can be improved if short-term patterns or cycles can be found. For example, in a trending market there are outstanding weekly and weekend patterns. It is most common to find that the price movements from Thursday to Friday (closeto-close) are in the direction of the major trend and that the movement on Monday is a continuation of that trend. By Tuesday (or sometimes Wednesday), the strength of new buyers or sellers has faded, and the market reverses due to lack of activity and some profit taking. It often stays in this state through Wednesday or early Thursday when it a~ resumes the trend. In a sideways market, the Friday and Monday directions differ from the direction during the prior week and often differ from each other.