S&P 500 – What’s next? 3


Over the last few weeks the S&P 500, on the surface, has the appearance of being somewhat difficult to analyze and trade. However, if one digs beneath the surface just slightly and brings along a firm understanding of cyclic principles as promulgated by Hurst, the picture is much clearer.

 

Below is a daily chart of the ES of approximately 300 days. The yellow wave at the bottom of the chart is the 80 day wave filter output superimposed on the blue&white 20 day wave filter output. There is still some uncertainty as to the extent of the frequency modulation affecting these price waves, particularly the 80 day wave. Over the most recent oscillation of the 80 day price wave, the frequency modulation appears to have caused the 20 day price wave to lose its 4:1 harmonic relationship to the 80 day price wave which it had maintained for many months. This occurrence is not unusual from a spectral perspective. Some additional clarity should be provided when the next 80 day low forms.

 

 

 

 

ES ##-## (Daily)  9_2_2014 - 5_8_2015

 

 

By digging a little deeper from a spectral viewpoint, the amount of uncertainty gets greatly reduced due to the shorter sampling period. The chart below is a 6 hour chart of the ES of approximately the last five weeks. The yellow arrows identify the last three lows of the 20 day price wave from the daily chart. The filter output at the bottom exhibits a nice 4:1 harmonic relationship with the 20 day price wave. Barring a frequency modulation at this level, one and a half further oscillations of this wave has a very high probability of being the next 20 day low and possibly the next 80 day low. Do not be misled by the lower low last week. Price inversions are not uncommon when the amplitude of the shorter waves is a large as it is presently. Just as Hurst told us 45 years ago, this level of precision continues down to the shortest tradable level.

 

 

ES 06-15 (360 Min)  5_8_2015

 

 


About William Randall

I'm a retired attorney who discovered the fascinating world of the financial markets almost two decades ago. After learning about Hurst, I've spent the last several years honing all the skills necessary to fully implement the techniques he taught.


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3 thoughts on “S&P 500 – What’s next?

  • Doc

    Hi William,

    Thanks so much for the update. I was hoping you would do so. As discussed before, the amplitude of the 80wk cycle seems to have shrunk quite a bit, so we have not gotten a large amplitude drop into it thus far. As you suggested, better not to trade what we believe should be happening, rather what we see happening and I think that is excellent advise and one which I have been prone to violate from time to time and usually end up suffering, not benefitting.

    Now the shorter cycles appear to be phasing nicely as you have shown. On the 6 hour chart you have shown, 10 cycles took 32 days, so a cycle appears to average 3.2 days (which is the expected 4:1 harmonic of the 2.5wk cycle currently running about just under 13 days) or roughly 77 hours, so 1.5 cycles from the Friday close (about 115 hours) would seem to target about midday Wed, give or take, for the next 2.5wk low, aka 20day low. As you have cautioned before however, the cycle low does not always correspond with the price low. That would be too easy, eh? Now whether that will also be the 80day low is an interesting question. The slope of your yellow line 80 day filter output seems to match best with the slope of the left most cycle leading into the Oct 2014 lows. Based on the current location compared to that cycle, the cycle low might still be 1.5 to 2 wks out from here. That is interesting as it dovetails with my analysis below.

    That said, based on my calculations, and on the last three 20wk cycles, the next 20wk cycle low appears to be due in the window May 20-June 15. Based on the last three 40wk cycles, the next 40 wk low appears to be due in the window of May 15-June 30. Based on the last three 80wk cycles, we are in the middle of the window or even slightly passed. How does that line up with your bandpass filters?
    Could you share with us your 20, 40, and 80wk analysis please?

    All the best,
    Doc

    • William Randall

      Hi Doc,

      Sorry for the delay in responding. The 10 week and 20 day waves have turned up as noted above. The shorter waves are still dominating due to the reduced amplitudes of the 20 day and 10 week waves. I have mentioned in prior posts that the amplitude of the 80 week wave was diminishing and was not having much influence on the price action . The weekly chart of the ES below shows that it has been reduced to almost zero! I would use caution in phasing the most recent 80 week low in that it will affect the average period of the 10,20, and 40 week waves projected forward (100 week cycle as suggested by some analysts is far too long in my opinion). The 20 week and the 40 week price waves do not currently paint the expected “Hurst cycles” phasing relationship. I’m waiting to see if either will define a market high (most likely the 20 week).

      • Doc

        Hello William,
        Thanks for the update. Curious about other instances in history going back that the 80wk output has flatlined at +/- 0.3 range for this length of time (19 months on your chart!) and how other instances ended (resolving with price moving up or down out of the flatline?). Might be nothing but might be interesting.