Cycling Up

The indices continue to follow the dominant price waves almost to perfection. The 80,40,20,10,and 5 week waves are all cycling up, which theoretically explains the current strength in the market. The S&P 500 continues to be leader as it pushes up vertically out of the most recent 80 day low. Even the NDX, which was lagging before, has joined the party and pushed to new highs. For the past six months the 20 day wave has exhibited an almost textbook 4-to-1 harmonic relationship with the 80 day wave as shown in the chart below. The 80 day wave even threw in a rare straddled trough. The 20 day peaks labeled “f” and “h”, which are right out of lesson five of Hurst’s cycles course and are somewhat analogous to David Hickson’s “FLD interactions” , offer the least amount of transaction risk for shorting the peak of the 80 day wave.

The Russell 2000, shown below, is also showing some short term strength as the 80 day wave turns up and the 20 day wave puts in a higher low. It is still an open question as to whether it will push up to new highs. Fortunately one does not have to speculate on what the market may or may not do. The price action will tell us through its cyclical nature.

The indices are cycling up to a 4 year cyclical high. Even though cyclical highs are thought to be difficult to pin down, the astute use of the cyclical principles promulgated by Hurst in Profit  Magic and his cycles course, and the use of modern computer tools, greatly simplifies the task.

William Randall