__T__**HE
APLICATION OF WAVE MECHANICS
TO FINANCIAL MARKET FORECASTING**

**A BRIEF DESCRIPTION
OF THE ANALYSIS OF THEORETICAL WAVE MECHANIC CHARTS AND THEIR CORRELLATION TO
FINANCIAL MARKET PRICE CHARTS **

**AS TAUGHT BY **

**DR. JEROME
BAUMRING**

**Wave Mechanics: (4 Wave Theoretical)**

**Basic Observations:**

**(Charts for reference will be
added at a later time.)**

**Composition:**

**The composite or summational
wave is the summation of the four component sinusoidal waves. Anytime one of
the underlying component waves turns there is change in velocity in the composite
wave except when two component waves simultaneously turn in opposite directions.
The pattern of the composite wave is the result of the summation and changes
of the various underlying waves. If you change the relationships of the length
of the waves, the summational pattern will likewise change. If you change the
phasing of any of the component waves, you change the pattern of the composite
wave.**

**Wavelength:**

**Wavelength or lambda refers to
the underlying component waves. In this model there are four component waves.
These waves have been chosen to have specific musical relationships to each
other. Wavelengths are usually referred to by their 1/4 cycle lengths, the amount
of time/distance from the 0 line to the maximum or minimum energy extreme. If
a sinusoidal wave is seen as a circle cut in half with the bottom half slid
forward the length of the diameter, one can then see the relationship between
the circle and the wavelength or cycle. A 1/4 cycle can be seen to be also a
1/4 circle, a 1/2 cycle 1/2 of a circle, 3/4 cycle 3/4 of a circle, and a full
cycle a full circle. This explains why we use degrees when referring to cycles
with a 1/4 cycle being equal to 90 degrees, a 1/2 to 180 degrees and a full
cycle equal to 360 degrees. These lengths are related to each other through
musical harmonics. Harmonics are expressed as ratios such as 3/4, 2/3, 1/2,
which relate to divisions of a vibrating string, or bell, or something of the
sort.**

**Phasing:**

**The phasing of the waves relates
the beginning of the different component waves together. If all component waves
began at 0 degrees, they would all begin by moving up, or phased up, according
to our explanation above. If they all began moving downwards, they would all
have begun at 180 degrees. At any point along the summational wave, you can
look at the component waves and determine their phasing to each other which
will be most easily expressed by whether the waves are moving up or down. If
two or more waves are moving up or down simultaneously, they cause what is called
either positive or negative constructive interference, respectively, meaning
that the combined sum of the energies of these two or more waves creates a greater
positive or negative amplitude summational wave. If one has two waves moving
up and two waves moving down, you get destructive interference, meaning that
there is an equilibration of energies causing a sideways movement on the chart.**

**Pattern Formation:**

**It is the interaction of these
component waves that forms the patterns of the summational wave on the charts.
It will be noticed when you have a particular pattern of the summational wave
on a chart, if you simply change one wave, whether large or small, it changes
the whole summational pattern. For instance, compare charts 1 and 3. Notice
that by changing the phasing of the smallest component wave it changes the pattern
of the composite. The difference in the composite pattern depends upon which
and how many of the component waves you change. Also notice that if you change
all of the components the opposite direction, you get the same pattern but up-side-down.
This is called an inverse pattern, and it should be easily noticed that there
are only 8 patterns in this 4 wave theoretical with 8 inverses.**

**Market Applications:**

**The wonderful thing about wave
mechanics is that it serves as an excellent foundation for incorporating many
concepts and ideas of the market. It acts as a sort of foundational schemata
upon which one can build a good model of market behavior in simplified form.
**

__Counting:__ One of the first
things one learns to see in the markets after studying theoreticals is how to
see energy vectors and from where to count them. We see that a bottoming or
topping complex is always made from a number of energy vectors changing simultaneously
(within the range of the top or bottom). Since we know that a directional movement
is caused by combination of several component waves, we would not expect that
the count from extreme top to extreme bottom to be the sole determinant of that
move. Rather we would count from the few energy change points at the top to
the few energy change points at the bottom, giving us a larger number of vector
counts, some of which must be the lengths of some of the underlying components
(or multiples thereof). If one were then to measure the different actions and
reactions in this way, one would see the same numbers recurring and in that
way determine some of the underlying intervals.

__Reactions and Congestion:__
In the same way, a good place to discover smaller component lengths in is reactions
against the major trend. The longer components will be determining the main
trend, while the minor components either strengthen that trend or cause reactions
against it. So measuring these reactions is a good way to uncover these smaller
components. Also when you have a long congestion phase in which the longer components
are equilibrating, you can often see the smaller cycles turning up and down
in the range of the trend, so this is a good place to discover them.

__Pattern Recognition:__ One
of the most useful aspects of the theoreticals is in the study of pattern recognition.
Since in the theoreticals we learn to see the cause and process of permutation
of form or pattern, we can learn to extrapolate this experience into real market
patterns. Two patterns which before might not have seemed similar now can be
seen to be almost the same with one or two or more components flipped. We have
a sense of the underlying causal structure of formations. For instance a broadening
top formation or bed of accumulation at a bottom can be seen to be cases where
you have a number of waves spread out over a longer period with most of them
equilibrating until the last one or two turn down or up respectively causing
the beginning of the reversal in trend. Or with a spike top or bottom, you know
that you have the underlying components changing almost simultaneously causing
the fast reversal in trend. Likewise, every pattern, whether top, bottom, directional
trend, or congestion has an underlying combination of component waves which
will cause that particular formation. Also, the slight irregularities one always
finds in these patterns can be explained by changes in the underlying component
relationships. These slight changes can also give you an idea what to expect
in terms of permutations. Say you have on occurrence of a bottom which makes
a clean downward half-circle, then you see later a bottom of the same time length
but with a sideways S pattern rather than the full arc. You would recognize
that you have a wave out of phase and that you should not expect the same movement
away from the bottom, but, rather that you may get a different angle of attack
and different ending to the upward movement due to this changed cycle. The trick
is to be able to quantify all of this so as to use it correctly.

__Angle of Attack:__ The angle
of attack is the slope at which the market moves at any time. Baumring has said
that the slope of a vector is its vibratory rate. It can easily be seen that
the slope of the market is caused by the relative constructive or destructive
interference of the underlying waves. A steep slope or angle of attack has a
number of underlying components moving together in the same direction. A flat
slope or congestion area only exists when you have an equilibration of underlying
waves.

__Larger Implications: __There
are many implications which come with the wave mechanics concept. One is the
whole idea of cycles, harmonics, and the law of vibration. These underlying
cycles must have some larger correlation to some cosmic or stellar phenomena.
All of these waves have harmonic relationships between them showing the underlying
order of the cosmos and its harmonic composition. This shows that the whole
universe can be broken down in terms of the law of vibration, or the harmonic
interrelation of time cycles as the causative foundation for mundane phenomena.

__Cycles vs. Periodicity:__
The difference between cycles and periodicity is an important concept. Cycles
are equivalent to what we look at as component waves on the theoreticals, energy
vectors, or directional force fields, moving from a positive to a negative extreme
at a regular time interval. Baumring said that there were 12 different stellar
combinations of component waves. A periodicity is the recurrence of a pattern
at some sort of time interval. This pattern is made of component cycle relationships
which recur simultaneously in a period of time. This pattern is more like a
sequence of events which occurs at the periodicity.

__Geometric Structure:__ It
is the harmonic relationships of these cycles which cause the geometric order
underlying the structure of the market. These harmonic relationships build harmonic
structures which grow like natural growth structures according to the geometry
of nature.

__Problems:__ In theory many
of these ideas seem clear and logical but when it comes to applying them to
the markets, the task is much more difficult. The theoreticals are a gross simplification
of the real market, and the simple analyses which can be done on the theoreticals
can become baffling when tried on a real market chart. Baumring would regularly
repeat that the theoreticals are just theoreticals, and the market is different.
If not, one could do Fourier analysis on the market and break out all of the
components and know where it is going, but Baumring said that this would not
work. Baumring also stated that the component waves were not sinusoidal, but
were elliptical instead. This obviously changes the picture, but would seem
to correlate more logically to planetary phenomena.

**Notes:**

__P1.)Acceleration
and Deceleration:__ Baumring used to talk about measuring acceleration and
deceleration off of a median line. He would say to dray a vector or line from
a high to a low and then the movements above and below that line should be symmetrical
and be a measure of acceleration and deceleration which would identify some
of the underlying waves.

__P2-3.) Least Common Denominator:__
When you have two or more waves changing together or crossing a node and you
multiply their 1/4 cycles together to find the LCD, then at that point of time
in the future they will be changing direction again. So find where two cycles
turn together and project the LCD both forward and backward and you will always
see them turn together or cross a node together at their 1/4 cycles.

__P5.) Spatial Orientation:__
Baumring says that taking time counts allows us to measure the spatial orientation
of the structure we are analyzing. So then we are able to see the structure
and what precedes it and the next structure and what precedes that and then
we measure the changes in torque between them.