The Peak Watch – 15 December 2012 2


As the US markets and Euro bounced up this week I started preparing for the peak of the current 40-day cycle to form. The identification of peaks is not an exact science as I’ve mentioned here many times, and so I find myself in a similar situation to the one in August / September this year – waiting for the peak to reveal itself.

This will be the peak of the 40-day cycle of course, but it might also prove to be the peak of the 80-day cycle, and perhaps even the 20-week cycle if the markets fail to climb to higher peaks after the formation of the 40-day cycle trough, which is very possible given the bearish underlying trend as we approach the 18-month cycle trough expected early next year.

At times like this as we wait for a peak to form I find it useful to take a step back and consider the shape of the longer cycles.

S&P 500

The peak we are watching for might have formed in the S&P 500 this week. Here is the bigger picture:

The developing M-shape

As mentioned previously this second half of the M-shape is expected to be distorted to the downside.

Nasdaq

The Nasdaq is looking a good deal more bearish than the S&P 500. Despite my bearish outlook into early next year it would be surprising to see the Nasdaq form its 20-week cycle peak at this low level, and so I do expect more of a bull move after the formation of the 40-day cycle trough.

A more bearish shape

Euro/US Dollar

The Euro had a very strong week. It is possible that the trough of Friday 7 December 2012 was an early 40-day cycle trough, but I suspect that we are seeing some fundamental interaction distorting the cyclic picture because of all the “good news” about the Euro. At any rate the M-shape is looking suitably bullish, following the 18-month cycle trough which formed in July.

More bullish

Gold

Gold has been falling from its 40-day cycle peak. The cycle shape here is expected to form a W because the analysis is inverted: peaks are synchronized in Gold, as opposed to troughs. We are very early in the 40-week cycle, and so there is a good deal of bearish W-shape activity ahead of us.

Not so bullish!

30 Year US Bonds

Bonds most probably formed their 20-week cycle peak as discussed last week on Friday 16 November 2012, in unison with many other markets, which implies that we are now looking for a 40-day cycle trough and a rise up to the 40-day cycle peak. I am showing here the alternate which is that the 20-week cycle peak has not yet formed, and that the move up following the 40-day cycle trough will be stronger as Bonds move into that peak. If Bonds don’t muster a strong move soon then this alternate will prove to be invalid.

Last chance for a bullish burst

Crude Oil

Oil has been laboring under a strong bearish underlying trend,  and is exhibiting a very bearish M-shape. It is probable that the 40-day cycle trough formed this week. We could see a higher peak form in the current 20-week cycle, but the bear might prove too strong.

Struggling to muster any bullish moves

US Dollar Index

The Dollar had a very bad week, and we might soon have to downgrade the  trough of mid-September back to the 20-week magnitude we initially phased it as. This would imply that the Dollar will be falling into a deeper 54-month cycle trough early next year.

A bad week for the dollar

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Have a good week, and profitable trading!

 


About David Hickson

I have been trading for over 20 years, but only had any success after discovering Hurst's cyclic principles. Unable to find any software to speed up the analysis process I created Sentient Trader software, which now pretty much does all the analysis for me. I am a film maker and a TV director, but nowadays I mostly provide consultation services to professional traders and fund managers, helping them to integrate Hurst analysis into their trading. I'm South African and live with my family in Italy.


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2 thoughts on “The Peak Watch – 15 December 2012

  • Jay

    Hi David,
    Thanks for the always insightful weekly post.
    Just a question regarding the timing, last week you stated that we were 20 days from the 16 Nov trough of the 80 days cycle and in the mid way pause. At the moment we are 27 days, therefore why should you expect the peak to form now. I do understand that you think the peak may come soon however if it formed last week, wouldn’t it be too soon with only 25 days to form a peak in a 80 days cycle? Can there be such a wide variation in the Hurst cycle?
    Thanks
    Jay

    • Paul Johnson

      Hello Jay,

      The shape of Hurst Cycles is influenced by underlying trend. Hurst Cycles are rarely symmetrical in shape and peaks are harder to place than troughs. When the underlying trend is bearish, the peaks of Hurst Cycles occur early. Conversely, when the underlying trend is bullish, peaks occur late.

      As the underlying trend for the US markets is bearish going into the 18 month trough due early next, we can reasonably expect the peak of the 80 day trough to occur early.

      Kind regards, Paul Johnson