Time To Turn – S&P 500 6


Last week I discussed the implication of the 20-week VTL breach in the S&P 500: That we have seen the peak of the current 40-week cycle in the markets. VTL’s are not as reliable as FLD’s in my experience, but it has been interesting to watch the S&P 500 reach up towards a new peak this week, but fail to reach new levels. At least so far, at the time I am writing this.

Could it be that the time has arrived for the turn down? In this analysis we can see a distinct fading of bullish impetus on each bounce out of a cycle trough:

Losing momentum

This analysis assumes that the 80-day cycle trough formed over the Easter weekend (as discussed last week). I particularly like the neat vertical nest-of-lows that result from the analysis, but that could just be my inclination to look for symmetry in everything.

The interaction between price and the FLD this week supports the analysis, as shown here:

The likely FLD interaction

It supports the analysis because we expect price to track along the 20-day FLD between interactions B & C, which is exactly what it did. The alternate analysis which expected the 40-day cycle trough at the end of last week, has price tracking along the 20-day FLD between interactions D & E, which is less common in my experience. Here is that analysis:Messy FLD interaction

As is often the case with Hurst analysis, it doesn’t really matter which analysis is correct. At least in terms of expecting a turn down to occur soon. An important level to watch is the level of the 80-day VTL, shown here:

Watch this level

I would not be surprised to see the market drop down to a 40-day cycle trough in early May, then bounce up again before finally breaching that 80-day VTL, after which it will be a slippery slope down the 40-week cycle trough which is expected in June 2015.

 


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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6 thoughts on “Time To Turn – S&P 500

  • vito

    Hi

    IMHO like I wrote in one of your columns last time , S&P and Dow confirmed that they are actually forming a leading Diagonal, and the implications are a swift termination to the down side expected, time wise early this week coming,Monday Tuesday.and that termination may be as violent as it gets ,which to me if it is, it may well be an F interaction .However, slightest of the margins of SP giving us an new record high may indicate an modest gain to new highs on the way to our magic Fib number of 2150 ( if you remember Dave we talked about this last December-Feb period ) Not expected to reach 2150 but possibly near by of 2139.

    Monday is being an FOCUS day it will be interesting to see what s coming this week. The other thing is if we are looking at a 40 week cycle being near by , i reckon June July being a candidate the expected fall to be very sharp for a few weeks .

    Best Vito

  • Jeffrey Young

    David, The NASDAQ and S&P 500 have made new highs albeit very marginal for the S&P 500 with the Dow still lagging..Also the 20 Week VTL has shifted on the S&P 500 similar to where it is on the NASDAQ without violation. What comments do you have on these developments that now suggest the uptrend is still intact. This is without any trough pinning mind you. I still feel that the 20 week low occurred on 02/02 but it seems to be less supported by price action at this point as well.

    • Jeffrey Young

      Actually the 20 week VTL shifted with it pinned on 02/02 as well indicating that this uptrend remains intact from a cyclical standpoint. How can we know whether a VTL will stay where it is or shift?

      • David Hickson Post author

        The big vulnerability of the VTL is that it might be based on an incorrect position for the cycle trough. There is only one situation in which Sentient Trader will shift the VTL such as it is doing now with the S&P 500, and that is if price behavior is contradicting the meaning of the VTL – in other words if following a breach of the VTL price reaches to a new high. That is what has happened in the S&P 500.

        There is a reason that ST shifts the VTL, which comes from the early history of Sentient Trader’s development – originally ST stuck to its guns and kept plotting the VTL on the trough (correctly in other words), but that resulted in a large number of false trading signals based off the VTL. Shifting the VTL to a possible alternate trough resolves the contradiction of a new high following a VTL breach, and it provides for safer trading decisions. Personally however I would not call yesterdays “new high” a very valid one.

    • David Hickson Post author

      Hi Jeffrey. I agree with you about the 2 Feb 20-week trough, despite the new high, which was indeed marginal. Some analysts only consider a new high if the close is higher, in which case they wouldn’t count yesterday as a new high. I discuss the Nasdaq alternative in the latest podcast: http://0s4.com/r/HTR