ST Outlook – 11 August 2012

There are some weeks when the markets seem peaceful, benign even. Those are times when I become extra cautious, because they seem to me like the calm before a storm. We have been expecting a peak in the US markets and as they struggled upwards on waning volume this week I started to batten down the hatches.

My comments this week will be brief because there is not a great deal to say as the markets have all moved in line with their cyclic pictures (which is why I have the “calm before the storm” feeling). If you have only recently discovered ST Outlook then you need to catch up with our analysis by reading past issues.

S&P 500

This chart shows the analysis we have been tracking in the S&P500 recently:

Approaching a peak

The peak of the 80-day cycle is expected to form soon, a peak which is not likely to be surpassed this year. Last week I showed the triad lines which were projecting to a target area between 1400 and 1420, and as price crawled over the bottom edge of that range this week it looked more like an exhausted mountain climber than a fresh energetic bull.

But because I like to play Devil’s Advocate, here is a chart that I have discussed before, which includes a non-Hurst 6-year cycle. If the current bull move does not break down soon and the current 40-week cycle does not start exhibiting a bearish shape then the reason is likely to be the six year “harmonic echo” that I have mentioned in previous ST Outlooks.

A six-year echo


Two weeks ago I discussed the 51-day cycle which formed a trough on 25 July 2012. In the above charts of the S&P 500 that trough is phased as a trough of the 20-day cycle, and here is the alternate option – that the trough is in fact an early trough of the 80-day cycle.

Bouncing out of an 80-day cycle trough

This phasing creates a slightly more aesthetic picture with the recent bull move in the Nasdaq, although that doesn’t necessarily mean that it is correct. Ironically, as is so often the case when performing a cyclic analysis, there is little difference in terms of expectation: both analyses expect a peak to form soon.

Euro/US Dollar

The beleaguered euro has struggled up from the trough of 24 July 2012, and is now forming the first 20-day cycle trough since then. The recent 20-day cycle has a bullish shape, but not so bullish that we can discard any of the alternates presented last week. Note how price was repelled by the 20-week FLD this week:

Reluctantly bullish


Gold also struggled valiantly upwards this week, but it made such heavy going of it (failing to make a new high) that my hopes of another peak in gold are fading. Gold has been riding along the 20-day FLD which it will need to leave behind this week if it is going to form a higher peak.

A higher 40-week cycle peak?

30 Year US Bonds

Falling from the 18-month cycle peak

Bonds fell as expected, and the peak on 25 July 2012 still seems likely to be the expected 18-month cycle peak. The timing of the peak is reinforced by the Euro trough the day before, and adds some additional weight to the analysis shown above in the Nasdaq with a trough of 80-day magnitude on the same day.

Crude Oil

Crude oil managed a higher peak this week. The next cyclic event in oil is likely to be the 80-day cycle trough expected in early September.

The 80-day cycle peak in place?

US Dollar Index

We have been expecting the formation of a 20-week cycle trough in the US Dollar, and it is likely that this trough was formed this week on 8 August 2012. Price will bounce from here of course, but I remain bearish the dollar in the medium term.

Forming the 20-week cycle trough

It is possible that the “calm before the storm” we are experiencing is simply the northern hemisphere taking a summer holiday, but I am going to be keeping a wary eye on the horizon. There are several peaks expected about now, and you don’t want to miss them!

Speaking of summer holidays and not missing things, we have a special “August offer” on Sentient Trader. If you’d like to be doing your own analysis, now is the time to get your hands on the market analysis tool that provides invaluable insight into what the cycles are doing.


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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