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.
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.