ST Outlook – 3 March 2012


S&P500

I am tempted to reach for my thesaurus and search for new ways to describe the continued upward progress of the S&P 500. Limping, faltering, eking, straining? At any rate there is no change to the analysis which I believe is playing out, which indicates that the market is due to start falling soon into a trough of the 40-week cycle, expected by late April or May this year. Here is the chart with my preferred analysis, with a subtle 20-week cycle trough on 30 January 2012:

Preferred analysis

Only 21.4 weeks have passed since the 4 October 2011 trough, and so it is possible that a sharp downward move occurring now would be the move into the 20-week cycle trough. As the market falls towards the trough we will have a better idea of the magnitude of that trough as prices crosses FLD’s and VTL’s on the way.

An FLD cascade pattern

Speaking of FLD’s: note the FLD cascade pattern which is developing. In Hurst terms this indicates that the market is “vulnerable to a downward move”. Another factor that makes me bearish at the moment is that so many others are bullish! Market Vane’s Bullish Consensus is at its highest level since October 2007. Remember what happened in October 2007? I continue to be wary of the potential for the development of a long-term straddled trough occurring now, echoing the straddled trough of August 2007.

EURO/US Dollar forex pair

The Euro has been tracing out some well-formed cycles, and our analysis has been keeping us well ahead of the game. Price is now falling towards a 20-day cycle trough, after which it should bounce and then fall to a lower 80-day cycle trough late in March or April this year.

Falling into a 20-day cycle trough

Gold

The dramatic $100 drop in the price of gold on Wednesday (it ended the day slightly better off, but the range for the day was over $100) tips the scales in favor of placing the 20-week cycle peak on 28 February 2012. The next month or two should see gold in the mid $1600 range, as shown by the projection boxes of the 80-day cycle:

Falling from a 20-week cycle peak

30 Year US Treasury Bonds

I mentioned last week that 30-year bonds are trapped in an FLD congestion zone. Here is a close up of that:

FLD Congestion Zone

The 20-week cycle peak is overdue now, and might well have occurred at the peak on 31 January 2012 (close to the S&P 500 trough shown above) or the peak on 28 February 2012 (matching Gold’s peak discussed above). A break to the downside would confirm the peak, but it is still not impossible that an upward surge could take price to a late 20-week cycle peak.

Profitable trading everyone!


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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