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PMiles - I know you know this but just have to say it. The more specialized or individual the investment category, the less obvious and predictable the cycles. The broader the index and the more representative of all investments, the more obvious and predictable the cycles.
Could a case be made that the 4-year low is already in? Might sound like heresy but looking back on this chart 4 years from now, that could be what we see. All cycles being up could explain the current monthly candlestick.
BB
Choose one:
1) Oil is not climbing to $75+/bbl soon.
OR:
2) The market is not climbing to new highs.
BBelt
Data is mixed here. Going long is of course warranted, but there is a 50/50 chance the new 5-week cycle will be left translated and will roll over into the 10-week low.
BBelt
Congrats, Bliss. It was MELT-UP time. :) (EOM)
$TRAN is up for the second day running (EOM)
Bliss, are you playing Atlas holding up the whole world of the stock market with one arm? (EOM)
Thanks Cash and Airedale. Cash regarding the relationship between fundamentals and cycles, I see that fundamentals can amplify cycles. Examples include the way the market flattened into the 20-week low and rolled out of the 2.5-week low into the 5-week low. So looking at the current configuration of broader market cycles, I see the price of oil being a significant catalyst for a potential shift in sigma el. If the price of oil settles and/or falls from here, we could see much more stable market action with a decent rally out of the 5-week low. If the price of oil climbs toward the $80 mark, the market will almost certaintly take on a much darker tone. I would anticipate the market falling out of the 5-week low the way it fell out of the 2.5-week low. So, same cycles but with very different possibilities.
You're right, though, as Hurst advocates, we do not speculate on fundamentals. We don't even speculate based on cycles. For example, the 5-week low should complete any day now, but no one here can say with any certainty whether the market will rally out of that low to the summer highs or not. We draw our lines in the sand, interpret the signal, and then take positions.
Just making notes to myself here.
BB
Cash - Would you lay out where you see the full range of cycles on oil from the 4-year down to the 5-week? In other words, list the cycles, whether they are up or down, and how far along they are. Obviously the the 20-week and lower would all be up and the 40-week would just now be rolling over the top. So the 80-week is now down as well. OK, so I'm figuring this out working backwards. How about the 4-year? When was the 4-year low in your view?
Thanks,
BB
Bliss, so far the price action is supporting Cash's cycle analysis--not the fundamentals. We will know soon enough.
BB
Cash--If you're right about oil, this market's going to hell in hand basket. The price is now at a level where it does make a difference. I'm talking about the general market--$BKX, $TRAN, $RUT, retail, and so on. The energy sector will be interesting to watch.
BB
FNM slid $5 on 15M shares. (EOM)
Tekprod, this is consistent with my expected scenario: Weak rally out of 5-week low followed by fairly steep decline into 10-week low.
Blackbelt
USA, when I sit back and look at the $RUT hourly chart from the 40-week low to present, I see a chart that is breaking down, looking increasing bearish. A climb above 675 in the next 5-week cycle is increasingly less likely.
Two hurricanes may have affected the cycles, but I simply cannot ignore the evidence of the way the RUT collapsed into the 20-week low and then fell into the current 5-week low. Maybe the market snaps back, but right now, it is a definite maybe. :)
When I draw a line across the August and September peaks, I think we are looking at a likely maximum target for the next 5-week cycle.
What this chart seems to be begging for is a parabolic mirror image of the ascent from the 40-week low as we head into the 80-week low. This is the model I'm following and will adjust positions if we see contrary signals.
Blackbelt
Oil appears to be putting in a short-term top. What affect will a fall in oil stocks have on the market as a whole?
BB
PMiles--Congrats on NEW. :) Looking for a mild, post-hurricane relief rally. Wish I lived in NY.
BB
So far, the market is on track to put in left-translated 5-week and 10-week cycles. Perhaps driven by fundamental events, but let's remember how often events correspond to the cycles rather than the other way around. I'm emphasizing that left translation in my interpretations until the market proves I shouldn't. The $NYA has a way to go before breaking the trendline running across the 40w and 20w lows. A bounce is anticpated here but not required.
BB
50/50 possibility that the market rolls out of the 2.5-week low and into the 5-week low without breaking above last week's high. $BKX head-faked a breakout on Friday and ran for cover today. Been looking weak for a while now.
BB
Bliss: Touche. :) (EOM)
Golfin. Completely agree with Geo. Was enjoying your perspectives until you starting getting into it with Bliss--whose name says it all. ;) In general, here on this board, the ideal is a TA-oriented post that states facts or evidence-based insights. We tolerate Blissbull's one-sided manic perspectives because it is easy to like a guy who so openly confesses his bias. The market could be falling through the floor of the century, and Bliss would say it is melt-up time. Well, it just might be. I blame it on that Brazilian sugar cane rum, but he claims to find all that bliss in the charts.
BB
The only way I know is to read the Hurst's Profit Magic book and listen to the course--both available from Traders Press (www.traderspress.com). Then stick around here. :)
BB
Golfin and anyone following this thread. Let's keep the dialogue professional.
True confession time: Finding Hurst is like finding religion. I spent 3 years betting against Airedale and Hurst in situations just like this one where all the evidence (to my mind) said the market should go lower, and then it would mysteriously reverse and go up. When this happened I was suspicious of market manipulation or Airedale's good luck, and on the rare occasion Airedale was wrong, I would use this as a reason to dismiss his views. Big mistake.
Hurst is *not* just a system where we impose rigid cycle periods on the market. It is a complete system for interpreting the market signals and trend. Given how effective this system is, it is odd how few get it. Even among professional analysts who claim to use Hurst, only the smaller percentage apply it with any practical consistency.
Mastering Hurst as practiced by Airedale, Cash, and USA is the best thing a trader/investor could do. Sticking with this one point of view in no way screens out common sense because it is common sense itself. For example, if the market were to collapse out of this 2.5-week cycle, no one on this board would fight that signal. Hurst gives us the tools to interpret the message with reasonable accuracy and consistency.
Blackbelt
Golfin
I highly recommend learning everything you can about Hurst cycle analysis. It is the answer to your question put to Airedale. Airedale reported that when he discovered Hurst years ago, it was like the curtains on the market had been pulled back.
We are now at a 2.5-week cycle low, and Airedale trusts cycles more than stochs. However, Airedale also expressed a little caution when taking his position today, realizing this market could experience a shift in trend soon.
Your oil theory, Golfin, is reasonable but it may be early--maybe not. However, the market does not do what is reasonable (to our minds) but what is cyclically necessary.
I hope Airedale doesn't mind my speaking for him. I know that if I were him I would tire of questions like yours because he has been publishing his views repeatedly for years. Searching the record (here and on Raging Bull) and reading everything he has to say would be a worthy endeavor. He is a truth teller and an outstanding trader/investor.
Hurst works. Period. I assure you there is a way to invest where you skew the risks so low that one could hardly call it speculation. Search for that level of skill.
Blackbelt
Thanks, Cash. Missed you there for a while. (EOM)
Golfin,
I like your hypothesis but it is speculation until oil can prove it has the strength to do what you suggest. At the moment, it hangs in the balance. I will confess it is ideally poised for a launch above $70. Are you aware of any fundamentals that are set to drive the price up now?
Blackbelt
Golfin, your oil theory isn't finished yet. If one more thing happens, the price is perfectly positioned for a run to a new high. If it does, this rally won't survive it.
$BKX and $TRAN both remain weak, and this market won't go far without them.
The market is set for a downer Monday/Tuesday timeframe.
Good luck to the brave and brilliant. Well, everyone else too.
BB
How much? (EOM)
Golfin, we are now learning why Hurst cycles work and elaborate speculative reasoning fails--and I include Schaeffer's commentary in that category.
Hurst analysis is not the mechanical application of fixed time periods on the market. It is not speculating on possible outcomes. It is signal processing--responding to the actual data coming across the wire (tape is too old-fashioned).
When we look at a chart from a speculative mindset, we can see infinite possibilities and tend to select the one that best fits our fantasies. The market consistently turns those fantasies into tangled wrecks.
The Hurst cycles on the other hand give us a framework that reasonably describes market behavior year after year, but these cycles must be interpreted flexibly from the point of view of signal processing. So at all times, we are asking, "What is the signal now? What is the signature of the smaller cycle, and what does it suggest concerning the larger? Are the cycles left or right translating? What is the sigma el? How will I recognize when it shifts?"
This disciplined approach minimizes speculation. And luckily--it is our great fortune--the cycles (with reasonable discrepancies) continue to behave as Hurst first observed 30 years ago.
I'm writing to myself here. Clarifying my own understanding with a tip of my hat to Airedale, Cash, USA, and others. If I have said something not quite right, please feel free to correct.
BB
10:30 AM Eastern: $NYA and $XBD cut new highs even as $TRAN falls lower and $BKX still acting weak. This divergence will be resolved.
BB
The US uses that much oil in 2 days.
BB
Golfin - You may be right. As of this moment, it is still speculation. The setup, however, in both the market and oil is perfect. Absolutely perfect. And you are also correct to say that too many smart people could be on the wrong side of the market right now. It isn't easy pulling large chunks of cash from the market in a hurry.
I may be requesting your address so I can send you the award for brilliance and bravery.
Let's see what happens with oil. The price of oil has reached the region where it has become a fundamental catalyst big enough to tip the trend down and bring the market into an early 80-week low. Brilliant--if correct.
BB
Two sectors that never really got on board the rally bandwagon: $BKX and $TRAN.
So far $NYA, $XBD, and $RUT are leading the way.
BB
I'm sure you're correct except the market moves in its own time. In your favor, the last 5-week cycle was left translated and flattened, and could possibly foreshadow a shift in sigma el from up to down. We shall soon see whether the current 10-week cycle repeats this by left translating and falling lower.
So far, I see no rational basis for loading the boat for a short sail.
Again, I wish you the best. My best advice to myself right now is to take a nap, tip my hat down to shade my eyes, mosey off into dreamland, and let this tight-as-a-drum market fight it out for a few more weeks. This chip-chip-chip trading business frays nerves and leads to impatient mistakes. Relax, Blackbelt, take a breather, and come back when the bulls are really worn out and ready to sell.
BB
A pullback here would be expected but nothing that would break the recent low--unless there is a substantial new catalyst equal to or worse than the London bombings.
BB
Golfin, I admire your persistence and strength of belief. The market simply does not appear prone to such volatility at this time. While an 80-week cycle low lies directly ahead (November to February timeframe), you may be just ahead of the curve.
If your analysis turns out to be correct, I will send you the Blackbelt Award for Trading Brilliance and Bravery.
I am currently holding a small, long-term short position which shall remain anonymous, so I am rooting for you. However, personally, I expect to see few downward fireworks for a few weeks.
This market has been founded on a rock of a broad base of advancing stocks. It is not the same market we saw in 2000 that was advancing on the backs of fewer and fewer high-beta screamers. Is it vulnerable to a substantial pullback? Always, but we don't invest in the odd possibility, and right now, the dramatic wave down just isn't there.
One measure of this market is how it responds to bad news. So far, it falls reluctantly and climbs methodically. It will take something dramatic to change that dynamic in my opinion.
We would both do well to take a long nap, wake up in late September, and then reconsider our positions. :)
BB
So far, divergence among various sectors seen in recent cycle lows has all but disappeared. Am curious to see how all plays out over the next 10 days. As of this moment, the 20-week low looks clean and brilliant, shining in the pre-autumn sun.
Dip expected here. Big one down always possible but unlikely.
Happy trading all!
BB
A variety of signals remained mixed--indicating to me that we could experience either a few days of consolidation--or another leg down as G1 stocks head into 80w low. I see the real possibility of a rally not really getting started until after September 15--just as we experienced the 40-week low April 29 but didn't getting firing on all cyclinders until May 16. Caution advised.
Yes the $RUT looks bullish--just as it did mid-January 2005.
Blackbelt
Bliss, actually events like this can cut both ways--which is why we call them funny-mentals. There is no way to know for sure. What I can say is that a long period of economic inactivity is often preparation for a boom--both financially and psychologically. It will be interesting to see what how this one transpires.
I'm not sure what happens here but the economic drag of high oil could be a catalyst for the shift in sigma el as we move through the next 6 months. Several economic fundamentals are beginning to shift already. When we look at a long-term chart of certain fundamentals such as durable goods, we see the same cycle patterns that occur in the market. The problem with fundamentals is when we try to project certain information into the future, and *imagine* the worst.
Blackbelt
When I wrote that the market may be overemphasizing the $RUT, I didn't mean this in any way as a snub against MRUSA who has been doing great work. What I meant was that perhaps the $RUT has become a bit too obvious now to the broader market, causing a stampede to the upside--and therefore a possible trap.
The other alternative is that various sectors are reaching 20-week lows in a staggered fashion--as we have seen during the last few market lows. If this is true, the rally gets rolling next week.
If this is a trap, then Cash's G1 80-w low could come into play in a mighty way.
I think this covers about every conceivable scenario. :)
Blackbelt
I agree yesterday's trading smelled fishy. It is almost as if the market is now overemphasizing the $RUT, following it rather than common sense. Other key sectors are so far reluctant to take the bait. See $BKX as just one example.
This could get interesting.
Blackbelt
Answer to my own question: 60 percent chance of a retreat into Friday--then rally after Labor Day. Just a guess for fun. Comparing all indices and sectors, I see mixed information. $NYA blasted off. Agree with USA--high degree of confidence that 20-week low is in, but a little consolidation may be needed to get this rally rolling.
Blackbelt