The greatest benefit of performing a Hurst Cyclic analysis on any financial market is being able to look ahead and forecast market turning points. There are various methods for calculating the target of a cyclic move, including the use of the Future Line of Demarcation (FLD), consideration of Underlying Trend, and the ways in which multiple cycles combine.
Considering all of these elements for many different cycles can be a complex process, which is why Sentient Trader presents turning zone boxes (FLD Pattern Projection boxes to be exact) for various cycles. These turning zones help to simplify the wealth of information that a cyclic analysis provides you with and indicates times and price ranges that markets are expected to turn.
Against the backdrop of the bigger picture that a cyclic analysis provides you with, it is very useful to zoom in and work out where the expected turns are likely to occur.
The two analyses that I have been tracking in the US markets are still both valid, but as mentioned last week my preferred analysis is this one:
I have plotted the FLD’s of three cycles on this chart, and they are beginning to form a cascade pattern. Sentient Trader uses the FLD patterns on the chart to generate the turning zone boxes. Here are those boxes for the 80-day cycle:
Notice how price entered the potential time period for the formation of a peak this week, and is at the center of the price range, indicating that the upside target has been reached.
The Nasdaq has not been as strong in its upwards move. Here are the 20-week cycle turning zones showing that price has just reached the lower end of the range in which it should form a peak. There is another week to go before the ideal time period for that peak to form.
The Euro bounced this week out of what could be a 40-day cycle trough, or we must allow for the possibility that the 40-week cycle trough has occurred early. Here are the turning zones for the 40-day cycle, showing how the trough that formed this week was just within the “buying” zone green box. Price has risen to the 40-day FLD, which is an important level to watch.
We have been expecting Gold to rise to the 20-week cycle peak expected in April. Here are the turning zones for the 80-day cycle showing how price formed a trough within its projected time range. Notice how the color which fills both boxes spills outside of the box. That indicates that the actual target indicated by the box is likely to be under-fulfilled or over-reached depending on the direction of the spill, and the recent trough was formed in the region above the buy-zone green box where the color spill indicated it might.
30 Year US Bonds
I mentioned last week that the 20-week cycle peak had possibly formed early in Bonds, and the strength of the move since then makes that seem likely. Here is that analysis, showing the 40-week cycle peak (synchronous with the 20-week cycle) at the end of February.
The turning zone boxes plotted here are for the 18-month cycle, and show how price is dropping into the range for the formation of a trough. When boxes are this large it indicates that the cyclic picture is not very clear, which is indeed the case in Bonds at the moment.
Last week we were watching the bounce in Crude Oil and standing by to take advantage of what might be the move out of an early 18-month (perhaps longer) cycle trough. The bounce continued this week, and here is an analysis that considers the trough of early March as being of at least 18-month magnitude.
There are several warning signs on this chart that we must pay heed to: price has been tracking along the 20-week FLD (the green line on the chart), which is not usual following the bounce out of an 18-month cycle trough. Price could well drop away from this FLD. The 80-day cycle turning zones offer another warning: notice how price is approaching the “sell” zone red box in terms of both time and price. And finally the cycle shape of the most recent 40-week cycle is not entirely satisfactory – a further move down would form a better cycle shape.
US Dollar Index
The US Dollar has been soaring out of the 18-month cycle trough of late January. I mentioned last week that the 40-day cycle trough is likely to be subtle, perhaps even hidden. Here are the turning zones for two cycles: the 40-day and 80-day cycles.
Price is in the zone now for the formation of the 40-day cycle trough, and a bounce out of that is expected. But if the 40-day cycle trough is very subtle then the next important trough will be the 80-day cycle trough which is shown by the green “buy” zone box in the end of April.
Have a great week and profitable trading!