One of the major lesson I have learned in recent years is patience, and this patience must be broad in two sense.
First, patience for leaving patterns and wave shapes to manifest themselves. Hurst it self made some interesting approaches to traditional technical analysis and cycles, explaining, from the cycles perspective, some typical patterns like triangles or head and solders.
Second, patience for deciphering which are very good opportunities from those which are just opportunities, it can be translated into, let’s take the most effective opportunities.
Another important and interesting lesson I have learned from David is about “the character” of a market, as a rule of thumb, there are 3 major types: stocks, commodities and forex. This character manifest itself regarding to the type of peaks and troughs they do:
– commodities: normally, peaks are V type (inverted) and troughs are rounded
– forex: peaks and troughs types alternate, if a peak is rounded them a trough is expected to be V type. I would say it depends on the dominancy of a currency
– stocks: troughs are V type and peaks are rounded
If it is the rule, rounded peaks or troughs are the synonymous of complex formations or, in terms of cycles, volatility in placing the final peak or trough, or, also, a synonymous of danger!
So, if we look to the indexes and the cyclic status of them I would say that volatility in terms of cycles is increasing, that a complex formation is unfolding and that there are still surprises for both bearish and bullish opinions. It is time to take care and leave the pattern to manifest itself, once it is clear, a safer entry can be done.
I suspect that major indexes are in the middle of a complex situation where the next phase is up, thanks to intermediate cycles and shorter cycles, meanwhile the long term pictures is getting very bearish. I leave you my latest long term analysis over the SP500, I’m expecting indexes to be supported or up from some day here up to the end of the year, them 2 years of downside!