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June 22, 2003
Didier Sornette

Fig. 3 shows the predictions of the future of the US S&P 500 index applying the so-called 'zero-phase' Weierstrass-type function, which is another child for our general theory of imitation and herding between investors. As for the previous figures, our theory takes into account the competition between positive feedback (self-fulfilling sentiment), negative feedbacks (contrariant behavior and fundamental/value analysis) and inertia (everything takes time to adjust). This 'zero-phase' Weierstrass-type function adds one additional ingredient: it attempts to capture the existence of 'critical' points within the anti-bubble, corresponding to accelerating waves of imitation within the large scale unraveling of the herding anti-bubble. The continuous black line is the forward prediction using all the data from Aug.9,2000 to June 19,2003, while the dashed black line is the retroactive prediction using the data from Aug.9,2000 to Aug.24,2002. Both lines are reconstructed and extrapolated from the fits to a six-term zero-phase Weierstrass-type function. We also present the two previous fits (red lines) performed on Aug.24,2002 (shown in Fig. 1) for comparison. The blue dots show the daily price evolution from Aug.9,2000 to June 19,2003. The large (respectively small) ticks in the abscissa correspond to January 1st (respectively to the first day of each quarter) of each year.

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