Completing the Sequence – 20 April 2013 2


Last week I wrote about the way in which price interacts with Hurst’s cyclic tool, the Future Line of Demarcation (FLD). Sometimes price crosses the FLD, sometimes it tracks along the line, and sometimes it bounces off it. Fortunately this is not a random series of interactions, but one that follows a sequence (the basis of the FLD Trading Strategy).

As the US markets drop down from last week’s peak they are completing a clear sequence of eight interactions which we label A – H. The final two interactions between price and FLD, G & H, lie ahead.

S&P 500

Here is the clear sequence with the 20-day FLD (the purple line on the chart) in the S&P 500 following the 20-week cycle trough of late February:

A clear sequence

A good clear cross at A; price tracks along the FLD between B & C; D is a clean cross with an accurate projection, as is E (discussed last week). This week’s interaction is an F, and we expect G next. A “G-interaction” is when price is drawn back to the FLD, touches it, perhaps crosses it slightly, and then drops away again in an H-interaction.

Nasdaq

The Nasdaq is also showing a textbook sequence of interactions. The expectation here too is for price to rise back to the FLD in a G-interaction, and then to drop further in the H-interaction. 

Euro/US Dollar

The Euro came back down to the FLD this week in a typical B-interaction where the FLD provides support to price. The G – H sequence that preceded the 40-week cycle trough in early April can be seen clearly on the left of the chart.

The start of a new sequence

Gold

I mentioned last week that Gold’s break of support was bearish, and indeed it was. The next cyclic event of note for Gold is a B-category interaction with the 40-week cycle FLD (the green line on the chart) as Gold climbs back up to form a 40-week cycle peak. B-interactions are often “reaching” interactions where price reaches towards the FLD but does not touch it, and that seems likely here. 

Broken support

30Year US Bonds

Bonds continued their climb to the 40-week cycle peak, and reached closer to the target a little above 150 discussed last week. The 40-week cycle is due now, and should form shortly.

Reaching for the 40-week peak

Crude Oil

Last week I wrote about the way in which price bounced down from the 20-day FLD. That was a typical G – H interaction sequence as can be seen here: 

The result of a G-H interaction

That provides us with an idea of what we can expect from the upcoming G – H sequence in the US markets. Double G – H sequences often occur, and so it is too soon to identify the 18-month (or longer) cycle trough in Crude Oil.

US Dollar Index

The US Dollar has now formed the 80-day cycle trough we have been expecting. The Dollar has further upside momentum in it as it moves up to the second peak of the M-shape of the 20-week cycle.

Subtle 80-day trough

Identifying the sequence of price and FLD interactions is a very useful way of confirming or questioning your analysis, and is also an important part of making the correct trading decisions as we discuss every week in The Hurst Trading Room.

Have a great week and profitable trading!


About David Hickson

I have been trading for over 20 years, but only had any success after discovering Hurst's cyclic principles. Unable to find any software to speed up the analysis process I created Sentient Trader software, which now pretty much does all the analysis for me. I am a film maker and a TV director, but nowadays I mostly provide consultation services to professional traders and fund managers, helping them to integrate Hurst analysis into their trading. I'm South African and live with my family in Italy.


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2 thoughts on “Completing the Sequence – 20 April 2013

  • Tony Barron

    In regards to gold I have a hard time recognizing where the B interaction will reach the level which comes close to FLD but it will not touch. Can you clarify that and after that how far low again this down move would be?

    Regards,

  • David Hickson Post author

    Hi Tony. The B interaction occurs as price moves towards the FLD (often touching it), and it happens at the peak (because Gold has an inverted analysis) of the cycle the FLD is based upon (in the case of the Gold analysis presented above that is the 40-week cycle). And so the B-interaction will be the move up into the 40-week cycle peak which is expected in June this year. It is too early to make a projection downwards from there: we have to wait to see at what level that B-interaction occurs, and project the next move from there.