Last week I explained why I thought there was weakness ahead for stock markets around the world. This week the markets obliged and started to show some of that weakness. I believe there is more to come.
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It turned out to be a good week to launch our new Hurst Signals service, with many very profitable trades. I published the chart from Hurst Signals last week with a short D-category trading opportunity in the S&P 500, and here is how that turned out:
The question now is “how far is this move going to go?” I often say that trading according to Hurst cycles is a very robust process, because even when your analysis is not perfect, or there is some uncertainty in the analysis it is still possible to make profitable trading decisions. This is because of the fact that an analysis tells us whether a market is likely to go up or down of course, but it also tells us the likely magnitude of that move because of the strength of the cycles involved. And if we are wrong about the magnitude there is often still money to be made because we are right about the direction.
This week provides a good example. That D-category trade is made on the assumption that the market is moving down towards the 40-day cycle trough. It is possible, even likely given the extent of the fall over the past two days, that the 40-day cycle trough has already occurred, on 13 January 2014, as shown here:
Both analyses are still possible, but the latter is more likely in my opinion. That means that the magnitude of the current move down is not that of a drop into a 40-day cycle trough, but a move down into a 40-week cycle trough, as shown here:
That certainly explains the sharp move of the last two days, and indicates that we could expect a bigger move still to come, into about mid-February.
Luckily (and this is why I call it a robust trading process) that doesn’t affect our trade. The D-category trade would turn out in retrospect to have been a much more profitable F-category trade.
Two weeks ago I discussed the Euro/US Dollar forex pair, and I pointed out an upcoming long trading opportunity. I posted a Hurst Signals chart which described that opportunity in more detail. Price was expected to rise to the FLD in a G-category interaction, and then fall to the 80-day cycle trough, before turning upwards and providing a great long trading opportunity. (In fact read the comments below the post for an astute forecast which includes the dates for those moves). Here is what happened:
If you haven’t yet subscribed to Hurst Signals, do so before our January launch offer ends.
Have a good week, and profitable trading!