ST Outlook – 31 March 2012


S&P 500
Last week we confirmed the peak of 19 March 2012 as a peak of the 20-day cycle and asked whether it might be a peak of the longer cycles as well. This week the market formed a new, slightly higher peak on Tuesday 27 March 2012 and so we find ourselves asking exactly the same question again: has the 40-week cycle peaked? The answer is also much the same: it is possible, but not yet confirmed. One has to be patient when identifying peaks in the market because of the fact that troughs are synchronized, but peaks are not (see our 2nd Golden Rule). A short-term picture shows that price might still have a little higher to go before turning down towards the 40-day cycle trough expected in mid April, although the peak on 27 March 2012 does (only just) satisfy the upward projections.

The short term picture

7 days have passed since the probable 20-day cycle trough on 23 March 2012, implying that we have about 10 days to go until that 40-day cycle trough. Within those 10 days it is very possible that price will cross the 20-week VTL which I mentioned last week. Here is an updated look at that VTL:

The 20-week VTL

When price crosses below that VTL (the green dashed line), the peak of the 40-week cycle will be confirmed, and the market will have started its downward journey to a 40-week cycle trough expected in June or July this year.

Euro/US Dollar

The Euro/US Dollar forex pair is continuing to march to a perfect Hurst rhythm.

A perfect cyclic picture

The chart shows clearly that the Euro is heading up towards an 80-day cycle peak, after which it will turn downwards to a 20-week cycle trough expected end of May or early June.

Gold

The current 80-day cycle in Gold is beginning to look a little bearish, but we must wait until the 80-day cycle forms its peak before jumping to any conclusions. The 40-day cycle should push price up to form an intermediate peak within the next 10 days or so:

40-day peak expected soon

30 Year US Bonds

Bonds spent the week rising towards the 80-day cycle peak as predicted last week. A peak was formed on Friday (30 March 2012), a peak which might very possibly be the expected 80-day cycle peak, as the cycles are currently “running short” in bonds (look at the current wavelengths at the right-hand top edge of the chart).

An early 80-day cycle peak?

Crude Oil

Perhaps the biggest event of this week (in cyclic terms) was that Crude Oil crossed below its 20-week VTL, confirming the peak of 1 March 2012 as a peak of the current 40-week cycle. Last week we said that the price of oil was likely to “resolve to the downside” from the FLD pause zone, and that is exactly what happened.

The cyclic event of the week

The crossing of that 20-week VTL is an early warning sign that the same thing might happen in the stock market (as discussed above). And so in closing I would recommend tightening your seat-belts! The impending downward slide might be steep …


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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