Is the Climate SELL Signal Imminent?

sell-buttonWhat a simple statistical investment tool can tell us about the climate

Guest essay by Eric Worrall

One of the simplest statistical tools used by investors is a moving average plot. If you plot the average share price of a company, or other investment product, with different smoothing periods, on the same graph, a crossover between the different plots can provide early warning of an imminent change in trend – a buy or sell signal.

From Wikipedia:-

“A moving average, as a line by itself, is often overlaid in price charts to indicate price trends. A crossover occurs when a faster moving average (i.e., a shorter period moving average) crosses a slower moving average (i.e. a longer period moving average). In other words, this is when the shorter period moving average line crosses a longer period moving average line. In stock investing, this meeting point is used either to enter (buy or sell) or exit (sell or buy) the market.”

http://en.wikipedia.org/wiki/Moving_average_crossover

The interesting thing about moving averages is they can provide useful, actionable information, without requiring any knowledge of the nature of the underlying commodity.
So what happens if we create a moving average plot of global temperature (in this case Hadcrut4)?

WFT_sell_signal

Source: http://www.woodfortrees.org/plot/hadcrut4gl/mean:60/plot/hadcrut4gl/mean:120/plot/hadcrut4gl/mean:240/plot/hadcrut4gl/mean:360

What is immediately apparent is we may be in the early stages of a significant inflection point – it is too early to tell for sure, but the beginning of an inflection which appears to centre on the early 2000s seems very similar to the inflection which occurred in the 1940s, heralding decades of cooling temperatures.

If the numbers I was plotting was the value of an investment, I would interpret the chart as a strong “sell” signal – a warning that a substantial drop could be imminent.

UPDATE: A previous post on WUWT by David Dohbro also comes to the same conclusion, and has a more detailed analysis:

http://wattsupwiththat.com/2013/10/01/if-climate-data-were-a-stock-now-would-be-the-time-to-sell/

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114 Responses to Is the Climate SELL Signal Imminent?

  1. Henry Clark says:

    What is immediately apparent is we may be in the early stages of a significant inflection point

    Yes, although this article and HADCRUT4 are not what would particularly show such in isolation, as opposed to in the context of http://img16.imagevenue.com/img.php?image=22187_expanded_overview3_122_176lo.jpg .

  2. DirkH says:

    Well, one can cite many “buts” but I’ll just say, HadCRUT4… 4 iterations into La La land… not data.

  3. Matt says:

    Technical (chart) analysis in stocks is, more often than not, a bunch hooey. There are so many technical indicators, I could probably find any stock and find multiple buy or sell signals at any given time. But, it has some basis in fact in that chart patterns can sometimes be used to interpret the attitudes of a mass of investors towards a particular security and, therefore, predict with some accuracy which direction it will head in the short term.

    Removing the human element from technical analysis removes any validity the technique may hold. I.e. there may be a little predictive value to technical analysis when millions of individual decisions are being made by humans, but I doubt there is any predictive value in a system like the climate.

    So, this may be a fun thing to look at and write about, but I wouldn’t take it seriously.

  4. The AMO will go negative in the next few years. And then 30 more years of cold.

  5. sabretruthtiger says:

    That’s what climate science should be, ‘removing the human element’ from analysis.

  6. Andrew says:

    IPCC rates AGW as AAA (triple A rated) déjà vu anyone?

    Bloomberg reports that the EU maybe set to fiddle the Carbon trading market, to push up the value of credits. Against EU rules.

  7. TomB says:

    I’m in agreement with Matt on this one. Interesting mental masturbation, but not a predictor I’d hang my hat on. Besides, in stocks the act of buying or selling quite demonstrably has a direct effect on the stock value. There’s no such corollary in climate data.

  8. 1957chev says:

    Make energy unaffordable,,,knowing there’s a mini ice age coming…..brilliant, but nasty!

  9. lsvalgaard says:

    Apply your analysis to US postal stamp rates:
    http://en.wikipedia.org/wiki/History_of_United_States_postage_rates
    and by your argument you might predict an imminent sharp drop [in fact, overdue]

  10. hunter says:

    The striking thig for me is just how trivial the actual change in temperatures has been, and how much exagerration the AGW promoters rely on to make the trivial changes in the last 180 years look scary.

  11. Resourceguy says:

    It looks a lot like the AMO long term plot. Meanwhile the shorter term AMO plot is in a definite turn down. Let the countdown begin on how long it takes for this to register with scientists, official agencies, and the longest lag users (policy leaders). Laying out the likely set of cognitive lags is as follows: 10 years for scientists, 20 years for official agencies, and 25 years for policy leaders and their advocacy communities. That still leaves a lot of time for science settled talk and policy misdirection plays.

  12. Doug Huffman says:

    Disbelieve all prognosticators, witchdoctor, prophets, weather or financial, without doxastic commitment. If they suffer no harm for error, then where is their downside for lying or errors?

  13. You can clearly see a clear deterioration in relative strength. I expect a negative MACD crossover to occur any month now.
    If I still had all my technical charting software (from a previous career), I’d plug in the data and see what we get. I’d think that global warming is overbought and we are due for a correction.

  14. Tom says:

    The only possible effifacy in financial “technical analysis” is that lots of other people are making the same interpretations of the doodles and will do the same thing at the same time (i.e. sell).

    Unfortunately Mother natures doesn’t sit scouring the temperature series for a “double top”, “head and shoulders” or “cup and handle”.

  15. fhhaynie says:

    The question is, are you a day trader or do you buy stocks based on fundamentals for long term investments? In climate science, there are fundamental processes that are causing those observable cycles. The IPPC models are designed to show that CO2 is causing the global average temperature to rise and that anthropogenic emissions are the cause of the rise in CO2 concentrations. The problem is that these “CO2 sensitivity” models do not correlate well with either the short term or long term cycles.There are natural fundamental processes driving those cycles. I think we would be better able to predict climate change by studying those fundamental processes that result in the observable short and long term cycles.

  16. David in Cal says:

    Matt nailed it IMHO. There’s no reason at all to think that this sort of analysis is valid for predicting temperatures. Also, even if it had some validity for temperatures, this prediction is based on a sample of just one prior similar pattern. One is too small a sample size.

  17. Rod Everson says:

    While technical analysis can offer some insights in markets, mostly by indicating points at which a lot of investors are going to be entering or leaving depending on the subsequent price action, this looks to me like a poor application of a moving average.

    For example, just look at the history of the graph shown in the article. The 60-month(?) line has crossed over the 120-month line many times in the past, and nothing could be determined as to the future direction of the longer term lines, or of the shorter-term ones, for that matter. Sometimes they continued up for years, and sometimes they turned lower. This is one moving average, among many, that has zero forecasting power, in my opinion.

  18. ShrNfr says:

    We are heading into the downslope of the AMO. That is sufficient reason for temperatures to decline. Chicken bones and sheep entrails are not necessary.

    And yes, I have worked as a professional investor in times past.

  19. James Cross says:

    Lief

    “Apply your analysis to US postal stamp rates”

    Actually, if you look at the adjusted for inflation, we are sort of dropping right now.

    Also, if I turn my head slightly to the side and squint, I think I can see a correlation between adjusted postal rates and sunspots. :)

  20. Doug Huffman says:

    N. N. Taleb, Literary and nontechnical books:
    Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets. New York: Random House and Penguin. 2001/2005. ISBN 0-8129-7521-9.
    The Black Swan: The Impact of the Highly Improbable. New York: Random House and Penguin. 2007/2010. ISBN 978-1-4000-6351-2. The book was completed in 2010 with the second edition including a long essay “On Robustness and Fragility”.
    The Bed of Procrustes: Philosophical and Practical Aphorisms. New York: Random House. 2010. ISBN 978-1-4000-6997-2.
    Antifragile: Things That Gain from Disorder. New York: Random House. 2012. ISBN 978-1-4000-6782-4.
    https://en.wikipedia.org/wiki/Nassim_Nicholas_Taleb#Finance_career

  21. Crispin in Waterloo says:

    Tom says it well. The analogy of the herd mentality driving events is an important one. The most obvious example is the traded value of carbon credits.

    I for one need to see a temperature plot based on the actual temps, not the down-rated ones in the 30’s and 40’s. What would the interpretation be if ‘the real’ temps were shown? Without fiddling the inflection point might be placed earlier.

    My reply on the basic premise is yes, it looks like it is following a cycle and it has started down. My worry is that it should have gone up for 7 or 8 more years before the turndown. The implications are chilling.

  22. anticlimactic says:

    The chart shows the 60 cycle of warming and cooling imposed on the warming since 1800. The 60 year cycle is the result of the interaction between the solar cycle and the oceans. Normally I would expect the slight down trend to last to 2030 HOWEVER the Sun is currently behaving much as it did in the Little Ice Age so there is the possibility of a large drop in global temperatures.

    Although we have a 400 year record of the 60 year cycle it still came as a shock to the climate ‘experts’. It also shows that Man has little or no effect on the climate.

    A significant fall in temperature will show that warming is not the worst thing to happen. We may get climate refugees, but from North America and Northern Europe. Just the kind of people trying to cool the world down!

  23. LLoyd Martin Hendaye says:

    Moving averages by definition are subject to a “half-span lag” effect, meaning (for example) that a three-unit average will lag one period, a five-unit average will lag two periods, and so on. As “measurements of central tendency” this is true of unweighted geometric and other means as well… the dilemma is, of course, that a long-term arithmetic/geometric mean will increase lag-time accordingly. Though “centered” moving averages correspond with actual inflection points, they do this not by eliminating but accommodating a series’ 1/2-span lag.

    Point is, that Moving Averages as trading tools –nevermind math/statistical time-series in general– must always register “behind the curve.” On this basis, regardless of esoteric “technical analysis,” climatological inflection-points depicted in arrears are obsolete: If-and-when smoothed “cross-overs” appear, their cyclical/periodic turn has in fact ALREADY HAPPENED.

    Averaging 17-year temperature trends not only lags activity by some eight years, but guarantees that current activity will differ in substance-and-detail. Just as investors cannot buy or sell at yesterday’s prices, or tomorrow’s, no-one is “expert on the future”: Reality deals in optimistic/pessimistic expectations only, and those are up for grabs.

  24. Felix says:

    Looks kinda like y=x+sin(x). Hmm?

  25. Old'un says:

    John Maynard Keynes famously said:
    ‘the markets can stay irrational longer than you can stay solvent’.

    Very much like climate and the Nations that are, sadly, pouring money into ‘CAGW mitigation’.

  26. DirkH says:

    Andrew says:
    January 30, 2014 at 6:54 am
    “Bloomberg reports that the EU maybe set to fiddle the Carbon trading market, to push up the value of credits. Against EU rules.”

    Against their promises. Rules mean nothing. They make them.

  27. richardscourtney says:

    DirkH says at January 30, 2014 at 8:02 am

    +1 and applause!

    Richard

  28. Doug Huffman says:

    Old’un says: January 30, 2014 at 7:59 am “John Maynard Keynes famously said: ‘the markets can stay irrational longer than you can stay solvent’.”

    “Markets can remain irrational a lot longer than you and I can remain solvent.” from A. Gary Shilling, Forbes (1993) v. 151, iss. 4, pg. 236.

    Without understanding the context, cherry-picked quotations are just sour cherries, a la sour grapes.

  29. TomB2 says:

    This article brought to mind a thought I had the other day
    Warmists remind me of lone yachtsmen who hear voices in the dark, mid ocean. It’s just the random noises of the sea but the human mind looks for patterns and creates ones it already knows, out of randomness.

  30. Clovis Marcus says:

    Market makers love a punter with a system, as do casinos.

  31. kim says:

    So, will the next big El Nino be a dead cat bounce?
    =====================

  32. wws says:

    Mathematically, I believe this is telling you that the first derivative of the function (temperature) is changing, which means you are seeing a change in the rate of change, and maybe even a sign reversal. (if it starts to head lower, rather than higher)

  33. Greg says:

    This idea was published here about 6 months ago and much more convincingly.

    Eric Worrel has just plotted a few different running means and does not even seem to have understood the Wikipedia page he links to.

    Could try harder.

  34. Gail Combs says:

    Wouldn’t looking at the rate of change (d°C/dt) in the signal be a better method?

  35. wws says:

    re: casinos, the observation is very true. Mathematics only “works” if the equations are a symbolic representation of the underlying reality.

    In Casinos, even many “smart” people fall prey to wishful thinking, and forget that the mathematics used there are only a representation of a carefully crafted illusion.

    The underlying reality is that the house always wins, unless you can figure out how to cheat. And this is where we circle back to the mindset of the warmists.

  36. rtj1211 says:

    Stock market data is very public and impossible to forge. It’s been around for well over 100 years and is therefore very amenable to analysis.

    Can the same be said of HADCrut4 and what is the effect, if any, of any ‘smoothing’ of ‘raw data’ or ‘changing data sets used to calculate ‘global temperature” on the plots you have made, if any??

    Just asking………

  37. Gail Combs says:

    Off topic but look at the solar images to the right of my comment There’s a Solar Eclipse Happening Now That Can Only Be Seen From Space

  38. Daryl M says:

    With all due respect, the techniques used for chart analysis have nothing whatsoever to do with climate.

  39. Ed Mertin says:

    Looks more like a sideways correction with a slight dip.

  40. rabbit says:

    Please God no not technical analysis. Can’t we do something more scientific like cast a horoscope or deal tarot cards?

  41. Old'un says:

    Kim at 8.24am
    ‘so, will the next big El Nino be a dead cat bounce?’

    Definitely!

    Brilliant.

  42. Greg says:

    I looked at this last time it came up ( where it was referred to as MACD ).
    http://climategrog.wordpress.com/?attachment_id=537

    I noted that the two curves used to detect the buy/sell point were very close to another analysis I’d done about the linear relaxation model that us used widely in climate modelling.

    http://climategrog.wordpress.com/?attachment_id=399
    MACD could be regarded as detecting the cross-over between the rapid orthogonal response and the long term response.

    The art is knowing how to chose the right periods. It seems something link 9 and 25 days is used in finance and (by chance) 9 and 25 years ‘worked’ for climate.

    I suspect the financial version of the MACD is purely empirical, but my analysis may explain what it is actually detecting.

    I think 2005 is very likely a turning point and now would be a good time to “sell” AGW and start worrying about REAL problems facing current and future generations.

  43. rabbit says:

    Should we now refer to alarmists and skeptics as bulls and bears?

  44. Greg says:

    Gail Combs says:
    Off topic but look at the solar images to the right of my comment There’s a Solar Eclipse Happening Now That Can Only Be Seen From Space

    Well it’s not a friggin’ eclipse then , is it? LOL

  45. Greg says:

    Gizmodo : “In-space solar eclipses are fairly common”

    There’s ALWAYS and “eclipse” in space. It’s just behind the Moon. Brilliant discovery.

  46. John G. says:

    If the rest of the chart counts as a clue one would expect the trend to be down for the next 20-30 years. That is eyeballed cyclical content indicates it’s more likely to be a substantial turn than a jiggle.

  47. rabbit says:

    Greg:

    Good point. There’s always a solar eclipse to be seen from somewhere in space.

  48. Mike Mangan says:

    OT, but good news. Henry Waxman is retiring. One less climate lunatic in Congress…

    http://www.latimes.com/nation/politics/politicsnow/la-pn-henry-waxman-retire-congress-20140130,0,7708869.story#axzz2rtrtmwB0

  49. Chris4692 says:

    The moving average might be a way to see inflection points that have already happened, but in stock analysis aren’t they trailing averages rather than centered?

  50. Henry Clark says:

    LLoyd Martin Hendaye’s comment on the moving average creating a large misleading lag is another aspect of note, well said.

    The turning point for global climate was the 1990s.*

    As precursor conditions for another El Nino as strong as the 1998 one do not seem to exist now or in the near future, the trend of cooling (relative to its high) after it continues. Incidentally, although generally speaking in terms of a global mean, it is of some interest that the U.S. (with some of the relatively more closely monitored temperature stations) has been cooling since then at what, in averages, is so far like a 0.4 degrees Fahrenheit per decade rate as illustrated at http://nextgrandminimum.wordpress.com/2014/01/25/continued-cold-puts-food-supply-at-risk/ .

    * (as in my prior comment’s image, http://img220.imagevenue.com/img.php?image=97977_expanded_overview3_122_713lo.jpg )

  51. rabbit says:

    If security technical analysis worked then every financial analyst would be daft not to use it, even if just to get a 1 or 2% extra return, as tools like moving averages are dead easy to calculate and widely available. Thus if technical analysis worked then it wouldn’t work, because that information would already be reflected in the share price.

  52. Technical and statistical analysis in stock trade is like astrology – no predictive power beyond self-prophecy. In climate science is even less useful. You’re more likely seeing the turn of the AMO, which we can by other means predict happening in this decade, roughly.

  53. davideisenstadt says:

    rabbit says:
    January 30, 2014 at 8:55 am
    true that rabbit.

  54. davideisenstadt says:

    Gail Combs says:
    January 30, 2014 at 8:29 am

    “Math is hard”

  55. Greg says:

    David Dohbro’s article linked in my last comment shows a “sell” point in 2007.

    This also seems to be the time at which Arctic sea ice switched from accelerating to decelerating melting.

    http://climategrog.wordpress.com/2013/09/16/on-identifying-inter-decadal-variation-in-nh-sea-ice/

  56. Michael D says:

    There appears to be a “pause” of similar magnitude and extent around 1992, which would have been a poor time to “sell.”

    I find it more interesting that there is emerging confirmation (discussed in yesterday’s WUWT) that much of this graph is just a human construction.

  57. Rob aka Flatlander says:

    According to these types of analysis I should have never bought bit coin @ $2, $10, $70
    If we have a direct link to something such as perhaps sun activity alone for temperatures then the down trend might be coming, but just as the warmists use ONE single variable to drive their predictions (atmospheric CO2). Climate is changing … constantly … and humans are just beginning to discover some of possible variables. And we do not yet have the equations nor the computing power to model them yet. We are still in the learning phase. AGAIN a shift of barely 1°C (-0.5° to 0.5°) over 174 years, on data based on significantly large chunks of earth surface, FABRICATED for a regional average, with probably 5 or more changes in collection technology, averaged to global scale, on a planet that has normal fluctuations of well over 110°C (-65° to +45°) means what? There’s no way the data sets margin of error is within this range. Equipment, user, technology, location. (yes I have read the HADCRUT error documents) Taken in light of historical planet temperature eras such as ice ages, and heat ages. HADCRUT does nothing but prove the 174 years have been relatively stable in the big picture of this variable planet. Come on, a 1°C variable in a +110°C range over a 510,100,000 km² area, over 174 years. Talk about an insignificant figure. It absolutely floors me how stupid this number is.

  58. Rob aka Flatlander says:

    from HADCRUT4: It should be noted that the HadCRUT4 uncertainty model only takes in to account uncertainties identified in the construction of HadCRUT4, and other as yet unidentified sources of uncertainty may exist. This model cannot take into account structural uncertainties arising from data set construction methodologies. It is clear that a full description of uncertainties in near-surface temperatures, including those uncertainties arising from differing methodologies, requires that independent studies of near-surface temperatures should be maintained. We recommend that, in addition to the use of HadCRUT4, data set users consider testing the robustness of their results by comparison to other available data sets.

  59. tom0mason says:

    So maybe I will hedge with more coal futures then.

  60. Rob aka Flatlander says:

    Another Data Set is 34 years of Satellite data that has noise within the equipments margin of error for 34 years running (ZERO IDENTIFIABLE INCREASE!)

  61. bubbagyro says:

    Let’s not get overly critical of an attempt to bring more light to a dim subject. Climate is a complex system, with x equations and x+p variables, by definition a chaotic and insoluble problem. On top of that, there are, apparently, lag times with chaotic unknowable intervals depending on which of many buffer systems are operative. That does not mean we have to give up trying new solutions. Even if the light we may bring is not within our perceptive wavelengths, given the current state of our eyes.

  62. Typhoon says:

    You do voodoo.

  63. Crispin in Waterloo says:

    @Old’un says:

    Kim at 8.24am
    >>‘so, will the next big El Nino be a dead cat bounce?’

    >Definitely!

    It is dead and bouncing because it froze to death.

  64. joshuah says:

    Well, Antarctic sea ice is getting ready for a new record high minimum later next month.

  65. Darragh McCurragh says:

    This suggests that, to prop up the “market”, government-funded temperature gauges be put up closer to artificial heat sources than before …

  66. Steve Case says:

    I think we’ve all seen this pattern. Even has a name, it’s called some sort of decadal oscillation, PDO, I believe. There are high and low points starting with a high in 1878, and 33 years later a low in 1911 and 33 years after that a high in 1944 and a low 33 years after that in 1977 and a high 33 years after that in 2010 and so, it’s easy to predict a drop in the next 29 years. Well is that really going to happen? Very interesting that 33 year breaking point. OK I fudged a little to make ‘em all 33 years, but it’s real close.

  67. u.k.(us) says:

    I’m not sure, but, I think Mr. Worrall was “taking the piss”.
    Great comments everyone, in either case.

  68. wws says:

    I think earth-caused solar eclipses are quite common, as well. Here on earth, we just call that “night”.

  69. Matthew R Marler says:

    it is too early to tell for sure,

    Yes it is.

  70. RACookPE1978 says:

    True, true. The short-term cycle (period 60, 66, 68, or 70 years => take your pick or give a best estimate) is most likely peaking out 1996-2015 ….

    Above, one writer used Temp ~ A + B * ( sin C (time))

    Rather, we seem to be either in a long-term 1000-800 year cycle PLUS a short term cycle of 60-70 years.

    But is the long-term cycle as we rise from the Little Ice Age peaking now (2000-2010)? Or will it actually peak as the Modern Warming Period in 2060-2070 AFTER the little drop “everybody” expects in 2025-2035?

    Or ….

    Instead of a two-period temperature cycle – one of 0.1 degree short-cycle on top of a 0.8 degree long cycle, do we have a sum of three of four different periods of 0.1 to 0.15 each?

    Assume a 68 year PDO cycle of 0.15 degrees. 3x 68 =
    Assume a different cycle of 0.15 at 60 years.
    Assume a third at 0.15 degrees of 200 years.

    In 1000 years, you have 5x 200-year beats plus
    At 1020 years you have 15x 68-year cycles plus
    At 1020 you ALSO have 17x 60-year cycles.

    Sure, it’s curve fitting. But if the curve fits, you may be convinced!

  71. Kip Hansen says:

    Can’t be any sillier than the other things they do with graphs and numbers in Climate Science — just about as meaningful too.

    Note to Eric Worrall ==> Careful not to bite down with tongue in cheek.

  72. hunter says:

    OT a bit, but I believe it is relevant.
    The AGW social movement’s credibility in the public square is not completely different from that of a stock investment. Stocks rise based on perceptions of value, both now and in the future. Much of the news is based on things that have happened in the past, but much of the value is based on bets about how the stock will perform in the future. In other words, there is a valuation model that is employed by decision makers. AGW is similar to this. In the heady days of Sen. Wirth’s stage mananged roll out of AGW, it was the early adopters who paid serious attention. They profited the most, in terms of social capital. Now AGW is a huge industry, funded by tax payers and insurance premiums. But what does AGW have to show for the many billions given over to its promoters? Not much. Think of a highly touted stock coming out of no where, with a really hot compelling story. Eventually the investment community wants to see results or the price will fall.

  73. Gail Combs says:

    hunter says: @ January 30, 2014 at 11:58 am
    what does AGW have to show for the many billions given over to its promoters?
    >>>>>>>>>>>>>
    A bunch of very healthy bank accounts (in the Caymans) belonging the political hanger-ons who took the money and ran. Al Gore leading the pack.

    The Climate SELL moment is when Warren Buffet dumps the solar companies he bought in Antelope Valley CA.

    If it happens just before 2016 you know which way the rigged elections are going to go.

  74. minarchist says:

    Takes climate astrology to a new level.

  75. John W. Garrett says:

    Anthony,

    Kindly keep the Wall Street chartists where they belong: in a halfway house for recovering snake oil peddlers.

    REPLY: Kindly run your own blog, and I’ll run mine with things I think are interesting. -Anthony

  76. peterg says:

    Applying different averages like that is simply a linear filter of some form. Unfortunately with the stock market, a lot of people are applying any and every form of mathematical analysis, and if any new form of mathematical analysis is found to work, it is immediately applied to maximal extent, such that it no longer works.

  77. Bob says:

    Using moving averages in investing has the distinction that changes in price trajectory will automatically be missed until the algorithm catches up. Many people claim predictive ability with technical indicators, but remember that if price is going up today, there is a probability it will go up tomorrow unless some piece of random negative information hits the market.

    Matt is correct in his observations.

    I am not sure why Doug Huffman listed Taleb’s books, but Taleb will tell you real quick that you cannot predict the economy or stock prices. Statistical algorithms have no predictive value in those complex systems.

  78. Manny says:

    If you look a the sea level chart, you’ll see a similar “sell” pattern. It looks like the sea level is potentially in a dropping trend…

  79. Manny says:

    Agreed. Statistical algorithms in themselves have limited, if any, predictive value. However, they can be very powerful when used in combination with other analytic tools and modeling engines.

  80. fhhaynie says:

    To Gail,
    So we should be charting solar company stocks to predict how the 2016 elections will go? They will fall this year if congressional elections don’t favor the administration and the new congress defunds solar subsidies.

  81. Tim OBrien says:

    Bring on the cold! Would love to see a mini-ice-age hit New York, Washington D.C., Chicago and Washington state along with Harvard and Yale where this stuff is being taught. Put up giant billboards saying “I TOLD YOU SO!” everywhere.

  82. Gail Combs says:

    fhhaynie says: @ January 30, 2014 at 1:45 pm

    Warren Buffet is a buddy of Obama, but if he is like Dwayne Andreas (Archer-Daniels-Midland Company) and perhaps America’s champion all-time campaign contributor, he has politicians from both sides in his pocket. (ADM is a big winner in the corn==> biofuel scam.) Believe me the big money bags are going to get advanced notice BEFORE the plug is pulled on the CAGW scam so they can get out before the rush.

    Here is an example with some of the same players. I expect a repeat of the same game plan.

    …Full credit for the expose on the business partnership of Strong and Gore in the cap-and-trade reduction scheme should go to the investigative acumen of the Executive Intelligence Review (EIR).

    The tawdry tale of the top two global warming gurus in the business world goes all the way back to Earth Day, April 17, 1995 when the future author of “An Inconvenient Truth” travelled to Fall River, Massachusetts, to deliver a green sermon at the headquarters of Molten Metal Technology Inc. (MMTI). MMTI was a firm that proclaimed to have invented a process for recycling metals from waste. Gore praised the Molten Metal firm as a pioneer in the kind of innovative technology that can save the environment, and make money for investors at the same time.

    “Gore left a few facts out of his speech that day,” wrote EIR. “First, the firm was run by Strong and a group of Gore intimates, including Peter Knight, the firm’s registered lobbyist, and Gore’s former top Senate aide.”

    (Fast-forward to the present day and ask yourself why it is that every time someone picks up another Senate rock, another serpent comes slithering out).

    “Second, the company had received more than $25 million in U.S. Department of Energy (DOE) research and development grants, but had failed to prove that the technology worked on a commercial scale. The company would go on to receive another $8 million in federal taxpayers’ cash, at that point, its only source of revenue.

    “With Al Gore’s Earth Day as a Wall Street calling card, Molten Metal’s stock value soared to $35 a share, a range it maintained through October 1996. But along the way, DOE scientists had balked at further funding. When in March 1996, corporate officers concluded that the federal cash cow was about to run dry, they took action: Between that date and October 1996, seven corporate officers—including Maurice strong—sold off $15.3 million in personal shares in the company, at top market value. On Oct. 20, 1996—a Sunday—the company issued a press release, announcing for the first time, that DOE funding would be vastly scaled back, and reported the bad news on a conference call with stockbrokers.

    “On Monday, the stock plunged by 49%, soon landing at $5 a share. By early 1997, furious stockholders had filed a class action suit against the company and its directors. Ironically, one of the class action lawyers had tangled with Maurice strong in another insider trading case, involving a Swiss company called AZL Resources, chaired by Strong, who was also a lead shareholder. The AZL case closely mirrored Molten Metal, and in the end, Strong and the other AZL partners agreed to pay $5 million to dodge a jury verdict, when eyewitness evidence surfaced of Strong’s role in scamming the value of the company stock up into the stratosphere, before selling it off….
    http://www.canadafreepress.com/index.php/article/9629

  83. Jack says:

    Technical Analysis of stocks is of a chaotic market. No one can predict the peak or the bottom. What it does is try to identify trends and crossover points where the trend changes. Nothing to say the trend will not change again.
    Daryl Guppy’s Multiple Moving Average though gives unequivocal turning points because the volatility is covered by the widest bands. When they narrow or cross, there is something of interest happening.

  84. Doug Huffman says:

    Bob says: January 30, 2014 at 12:56 pm “I am not sure why Doug Huffman listed Taleb’s books, but Taleb will tell you real quick that you cannot predict the economy or stock prices. Statistical algorithms have no predictive value in those complex systems.”

    That is precisely why! And he had much more to say, shouting over the blurring line between mathematical logic and quantitative analysis. Everyone here should read at least his popularized books and, if one’s technical background is strong enough, his academic papers.

    He quotes his collaborator Benoit Mandelbrot that reality is fractally complex, beggaring “complex systems.”

  85. rogerknights says:

    Greg says:
    January 30, 2014 at 8:47 am

    MACD : time to sell:

    http://wattsupwiththat.com/2013/10/01/if-climate-data-were-a-stock-now-would-be-the-time-to-sell/

    Thanks for that. Here are a couple of comments I made on that thread, about 4 months ago:

    I love this approach, especially because I suspect we’re in for a sharp and prolonged decline in global temperatures, because it would be a manifestation of a cosmic come-uppance (nemesis) for hubris. However, as one can see at a glance from the chart, following MACD signals isn’t 100% correct. It can give short-term fake-outs, as it did in 1895 & 1902 (approximately, by eyeball). And it works best in strongly trending markets. In directionless, or “choppy,” markets, the number of short-term fakeouts rises to the point of eliminating the profit–or even delivering a loss for a while.

    But trend-following is the only automatic system that “works” in financial markets over the long term. See the four books on turtle trading here: http://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3Dstripbooks&field-keywords=the+way+of+the+turtle

    See also the additional books on trend-following by Michael Covel and others, here: http://www.amazon.com/s/ref=nb_sb_ss_i_1_13?url=search-alias%3Dstripbooks&field-keywords=michael+covel+-+trend+following&sprefix=michael+covel%2Cstripbooks%2C250&rh=n%3A283155%2Ck%3Amichael+covel+-+trend+following

    Trend-following is not the same as what is meant by old-time “charting”–the Edwards & McGee stuff. Trend-following has had a very successful track record for about 20 years. See M. Covel’s book:


  86. Bob says:

    Doug Hoffman: I agree, and did not articulate my thoughts well. I have read two of the Taleb books, and have two more in Kindle form. I will read them as I get the chance. Taleb does not mince words!

    I have taken a look at a couple of his papers, but don’t have math background. It will take a while to “book” it through the papers.

  87. Streetcred says:

    What about charting the share price moving averages of the listed green technology companies … along with their subsidy funding … ;)

  88. tally says:

    I would bet on technical analysis over climate modeling any day!

  89. Clay Marley says:

    I dabbled in technical analysis of stocks some years ago. I learned they have no real predictive value. In other words, a great way to lose your shirt.

    However some of the techniques are good tools for visualizing trends and noise in data. As visualization tools they can have some value. I use a variant on Bollinger Bands for example, in some process control metrics.

    Just don’t hope to predict tomorrow.

  90. Steve from Rockwood says:

    Matt says:
    January 30, 2014 at 6:44 am

    Technical (chart) analysis in stocks is, more often than not, a bunch hooey. There are so many technical indicators, I could probably find any stock and find multiple buy or sell signals at any given time. But, it has some basis in fact in that chart patterns can sometimes be used to interpret the attitudes of a mass of investors towards a particular security and, therefore, predict with some accuracy which direction it will head in the short term.

    Matt, there is a reason that technical (chart) analysts wear bad suits. If their analysis worked they would be rich.

  91. Steve from Rockwood says:

    Doug Huffman says:
    January 30, 2014 at 2:34 pm
    ——————————————————-
    Taleb’s Black Swans don’t really have a place in climate science. The climate is not interested in one time events (well it wasn’t before extreme weather, but we digress). The big problem with mathematical analysis in climate is the data. It is incomplete, it has been tampered with and we don’t understand the underlying physics (well enough) to attribute theory to observation.

    For example, the use of Fourier transforms to describe non-periodic events. When the mathematical analysis becomes so complex that even the scientists using it disagree with each other – well there must be a problem with the data.

  92. Gary Pearse says:

    “So what happens if we create a moving average plot of global temperature (in this case Hadcrut4)?”

    In this case, you are working with a chart with feloniously exaggerated data points (jail time if this was the TSX). The Sell order was probably years before that. Don’t forget that Hansen in 1998 believed we had to be going to finally beat the mid1930s/early 40s all time high in the US. When it didn’t happen, he re-rigged the earlier data downward in a few tranches by several tenths C.

    In Canada, he forgot to re-rig the record at Yellow Grass Saskatchewan where the July 5th, 1937 record still stands:

    “In more than 120 years of official meteorological observation, Saskatchewan has captured some remarkable weather records. The highest temperature ever recorded in Saskatchewan—indeed in all of Canada—was observed at Yellow Grass and Midale on July 5, 1937, when the temperature hit 45.0°C. The lowest temperature ever recorded in the province is -56.7°C, observed at Prince Albert on February 1, 1893.

    http://esask.uregina.ca/entry/meteorology.html

  93. b fagan says:

    Wow – I sure hope this guy isn’t handling other people’s money.

  94. AlexS says:

    [snip]

  95. Brian H says:

    Don’t pooh-pooh this too fast. Whenever there’s a change of direction occurring or developing, the short-term average responds faster than the long-term, necessarily. That shows up as a crossover.

  96. david dohbro says:

    Eric – thanks for the article. No disrespect, and no hard feelings but I already did a MACD analyses of Hadcrut4 data last year and it got posted on WUWT here: http://wattsupwiththat.com/2013/10/01/if-climate-data-were-a-stock-now-would-be-the-time-to-sell/
    and a quick search -to do your due diligence and homework – and referencing it in your article would have been appropriate. Btw, the MACD is still on a sell since 2007 for all databases (GISS, NCDC, Hadcrut)

    To all those commenting here thinking that Technical Analysis is bogus and doesn’t work; you obviously don’t know what you are talking about and I am 1001% sure you don’t even trade. What would you recommend for trading and investing? Just buy and hold? Good luck… When do you buy, when do you sell? Oh and nothing is random in the market. Try Fibonacci extensions for a change, the market loves those… Fibs are not random. The whole universe, our world, everything is Fib related. So are the financial markets.

    MACD, FSTO, MFI, EWT, S/R, Pivots, BBs, RSI, MAs, etc, etc are all KEY to investing. You need to be able to track, follow and understand them all to be successful. TA, and TI are KEY to investing. ALL traders and investors use them; from minutes to yearly time frames. None-traders, dumb money, retail investors, moms and pops don’t use them because they haven’t learned to understand them. You must fall under one of those categories, otherwise you wouldn’t state what you stated. Please step aside and leave the real trading up to the pros. No in fact please trade, I’ll take all your money; ’cause if somebody looses money another one pockets it… So please, keep on investing… Saying TA is voodoo-magic you may then very well side with AGWers… Sorry but you really don’t know what you are talking about.

  97. Hoser says:

    You can see what you want in those curves. How is the plot now much different from what you would have seen in 1980 or 1985 with a ‘crossing’ followed by a sharp up-tick? It’s because we know there are other factors all moving in the right direction to support the downturn it is more credible now than those previous cases. Nevertheless, it is still a bet. In fact, as others have said, we don’t know what will happen.

  98. Eric Worrall says:

    david dohbro sorry for missing your article – I would have referenced it had I recalled it at the time of writing my post. It is a fascinating field, and I thoroughly recommend anyone interested in more depth view your post – it is a far more detailed analysis than my WFT effort.

    http://wattsupwiththat.com/2013/10/01/if-climate-data-were-a-stock-now-would-be-the-time-to-sell/

  99. John Finn says:

    sunshinehours1 says:
    January 30, 2014 at 6:49 am
    The AMO will go negative in the next few years. And then 30 more years of cold.

    But the AMO was negative all through the 1980s and up to the mid-1990s.

  100. John Finn says:

    If the numbers I was plotting was the value of an investment, I would interpret the chart as a strong “sell” signal – a warning that a substantial drop could be imminent.

    Why don’t you contact James Annan to see if he is still taking climate bets.

  101. John Finn says:

    tally says:
    January 30, 2014 at 4:03 pm
    I would bet on technical analysis over climate modeling any day!

    Another one who seems prepared to bet on future temperatures – but who will no doubt pass if someone challenges him.

    To be honest this faux certainty about imminent global cooling is become tiresome. I’ve been reading it for a decade or more. The rate of surface (and atmospheric) warming has slowed but, as someone has already noted, it’s no different to other earlier periods. But, it is most definitely NOT COOLING.

  102. Braqueish says:

    David Dohbro forgets, I think, that reviewing market trends using standard charts has its own internal feedback mechanism — i.e. that hundreds, if not thousands of other investors are also viewing the charts and basing their investment decisions accordingly. Consequently the charts are not an objective view of the markets, but an internal mechanism within them. This is why momentum-chasers are as likely to lose their shirt as win a few dollars.

    Incidentally, Der Spiegel has an article this morning which shows that any investor would be wise to pull out of the wind farm market… http://www.spiegel.de/international/business/wind-power-investments-in-germany-proving-riskier-than-thought-a-946367.html

  103. Eric Worrall says:

    John Finn

    … To be honest this faux certainty about imminent global cooling is become tiresome. I’ve been reading it for a decade or more. ,,,

    To be honest this faux certainty about imminent dangerous global warming and disappearing icecaps is become tiresome. I’ve been reading about it for a decade or more – a decade during which surface temperatures have stagnated, despite a massive rise in CO2… :-)

  104. Zap says:

    Its a bubble!
    short! short! short!
    : )

  105. anticlimactic says:

    You might want to keep a copy of the chart for future reference.

    I saw a similar chart on the JoNova website where the warming from 1910 to 1940 had almost disappeared. The warming from the 1970s then looked far more significant. I read that GISS are making the slight cooling from 1940 to 1970 disappear.

    In a few years time the chart will no doubt show flat temperatures up until 1970 when the rise will look like a mountain. Who know, even ‘the pause’ may start to disappear.

    There is no one to stop them. Certainly most of the press, most politicians and most climate ‘scientists’ would comment!

    http://stevengoddard.wordpress.com/2014/01/31/hiding-the-1970s-ice-age-scare/

  106. anticlimactic says:

    PS. last sentence should end ‘would NOT comment’

  107. Greg Goodman says:

    John Finn says: “To be honest this faux certainty about imminent global cooling is become tiresome. I’ve been reading it for a decade or more. The rate of surface (and atmospheric) warming has slowed but, as someone has already noted, it’s no different to other earlier periods. But, it is most definitely NOT COOLING.”

    Climate has been cooling long term since the halocene optimum about 8000 years ago.
    Climate warmed naturally over last 300 years
    Climate warmed naturally over first half of 20th c.
    Climate cooled naturally from 1935-1975

    Climate warmed from an unknown combination of AGW and natural causes from 1975 to 1997

    To be honest this faux certainty that this latter period is a valid calibration period for century scale extrapolation is become tiresome.

  108. Greg Goodman says:

    anticlimactic says:
    You might want to keep a copy of the chart for future reference.
    http://stevengoddard.files.wordpress.com/2014/01/hidingthedecline1940-19671.gif

    Thanks. Do you have the original data archived anywhere? Where is this available?

    Do you have it as monthly?

    I long ago got into the habit of keeping a copy of any dataset before downloading an update. I then check for this kind of adjustment.

    BTW, do you have any pre-2012 versions of global means sea level?

  109. Greg Goodman says:

    The flip side of that adjustment is that it makes the 20th c. a more uniform, continuous increase thus reducing the amplitude of the supposed ~60y cycle. That makes the ‘hiatus’ even more remarkable and implies that a century long rise is coming to an end.

    Such a cycle was detected by Thomson et al 2009 in the Gomez Dome ice core.
    http://climategrog.wordpress.com/?attachment_id=53

    Though clearly seen in their graph they carefully avoid writing about it in the text of their paper about “unprecedented” warming based on computer simulations of the local climate that they don’t even compare to the overlap with their own data !

    Unprecedented malfeasance?

  110. Gary Pearse says:

    Braqueish says:
    January 31, 2014 at 5:47 am

    “David Dohbro forgets, I think, that reviewing market trends using standard charts has its own internal feedback mechanism — i.e. that hundreds, if not thousands of other investors are also viewing the charts and basing their investment decisions accordingly. Consequently the charts are not an objective view of the markets, but an internal mechanism within them.”

    Right on!! I traded in commodities with a club decades ago and this wonderful method using some long and some short moving average and when the short fell below the long = sell and when short rose above long, buy. Bullion traders do this kind of stuff and this is part of the “technical analysis” oxymoron. You are correct, that if the method is widely used then triggering buys and sells create a self-fulfilling “prophecy” to a degree.

    Slavish adherence to this has the predictable results that you can also lose your shirt from time to time. For example, if you get your buy signal on frozen orange juice futures the day before a massive frost in Florida, you end up on the wrong side of the trade (when oranges freeze on the tree, they are made into orange juice to save the crop and their is a glut of same). The uninitiated may think, okay you turn around and make a sell order. Here is where the trap is waiting: the market has a daily limit up and down and you aren’t the only one to jump in to sell. This means, before your sell gets processed, the market has to sink a number of daily down limits before the number of buyers appearing becomes sufficient to execute your order. I’ve forgotten what the cost of a slide in orange juice is – $300 for each penny the price goes down with a contract? I recall sugar was $1100 per penny change. A couple of years worth the success is quickly wiped out, maybe even along with your house.

    Suggestion, yeah you can use this but spend a lot of time studying fundamentals and don’t set yourself with software for automatic buying and selling! Check out the status of sugar crops on a regular basis and the weather factors that effect them. If you get a forecast for -30C in Toronto, a speculative short sell on orange juice might pay off. If you are wrong, you probably won’t have too big a losses in buying in again because daily limits are not likely to have been triggered.

  111. RACookPE1978 says:

    Gary Pearse says:
    February 1, 2014 at 9:57 am (replying to)

    Braqueish says:
    January 31, 2014 at 5:47 am

    “David Dohbro forgets, I think, that reviewing market trends using standard charts has its own internal feedback mechanism — i.e. that hundreds, if not thousands of other investors are also viewing the charts and basing their investment decisions accordingly. Consequently the charts are not an objective view of the markets, but an internal mechanism within them.”

    To emphasize!

    The “stock market” financial markets, futures trading markets, and even the day-to-day eBay/Craig’s list/Superbowl ticket markets are NOT a complex chaotic “climate market” …. ALL of the first group – though used here as a analogy to the climate future – are personal and human interactions somewhat regulated as pointed out above) by fractions and dates and account numbers and investment “rules” both written, unwritten, enforced and unenforced. Crowd panics, crowd emotions, and crowd fears ARE a valid and complicated interference in every financial “futures” rule.

    But, the climate?

    NO RULES. NO EMOTIONS, no fear, no “forecasting” or predicting or hedging AND .. no control. No control by the users (we humans) NOR by the different factors changing at different times. Thus, if we assume a solar influence as an independent influence (forcing), that solar influence WILL HAPPEN regardless of any other factor changing (or NOR changing!) at the same time. That a solar change happens 2 months prior to a volcano does NOT delay or speed up the volcano’s eruption (some may differ, but that too is part of this “trend prediction” game of this thread.

    Thus, over the past measurable years, IF the past changes in climate were cyclical, and IF today’s single obvious change in CO2 levels are near-negligible in the world’s climate, and IF the causes of those past changes and IF the effects of those past influences in those past cycles are similar to what is going on now, then cyclical predictions do make sense and can be projected usefully. A lot of “if’s” there – but, then again, the CAGW religion tells us that past cycles absolutely do not matter (if they even acknowledge that those past changes happened at all) , and that no past changes are happening now, and that no future changes will ever happen except CO2-induced warming. So you need to compare if-if-if-if to “didn’t happen then + didn’t happen then + is not happening now + will not happen in the future except for CO2 which will kill us in the far deep future”.

    Whether the climate cyclical projection/prediction is correct is a whole another matter …. But simply using definitive and known financial “failures-to-predict” in the stock market and futures market to “prove” cyclical predictions near-term climate predictions will never be “right” is itself wrong.

  112. Eric Worrall says:

    A number of people have suggested that moving averages do not apply to climate, because they only work in investment, and only because everyone believes in them.

    This is a misunderstanding of what moving averages represent.

    Moving averages are a tool for teasing out the underlying trend from noisy data – nothing more, nothing less. By smoothing the data at different levels of smoothness, they seek to highlight changes which have already occurred.

    This highlighting of changes is not dependent on any predictive mechanism, or belief in the system.

    I thoroughly recommend anyone interested in a more in-depth analysis read david dohbro’s post on the subject:- http://wattsupwiththat.com/2013/10/01/if-climate-data-were-a-stock-now-would-be-the-time-to-sell/

  113. John W. Garrett says:

    Dear Mr. Watts,
    My respect and high regard for WUWT and the invaluable work that you do is such that my sole intent is to prevent any blemish from doubtful associations. Your accomplishment in stemming the tsunami of misinformation and the intentional attempt to stampede the country into misguided legislative action has been, and continues to be, irreplaceable. I am, quite obviously, an admirer and a fan.

    http://wattsupwiththat.com/2014/01/30/is-the-climate-sell-signal-imminent/#comment-1554918

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