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Lets Talk Stock and Commodity Market Cycles

Stock-Markets / Financial Markets 2012 Jun 18, 2012 - 04:55 AM GMT

By: Anthony_Cherniawski


Best Financial Markets Analysis ArticleI hope your weekend went well.

I wish to discuss how the cycles have played out and what we may expect in the following days. First, I must admit that I missed the Master Cycle low for FXE and the other ETFs that follow the “liquidity cycle.” Apparently it happened on May 31 for the euro. My Elliott Wave analysis called that low a wave (3) and the inability to rally forcefully caused me to continue waiting for the final wave (5) that didn’t come. Thursday, June 17 was day 254, which is the average duration of the Master Cycles that I have tracked for the past 10 years. The market ramp on June 8 may have been an intervention to stop the decline before options expiration. What followed was another ramp into options expiration and its final high that did not add any appreciable value.

(ZeroHedge) In a perilous replay of the Spanish bank "bailout", the proxy for bailout sentiment, the EURUSD pair, was up 61 pips to just under 1.2700... and that's it. Naturally, if the world suddenly thought Europe was "fixed", Spain notwithstanding, one would imagine the reaction by the FX market would be just a little more invigorated than merely confirming that what is playing out (namely the lack of a definitive Greek government) has already been priced in. And yet here we are...

XLF is the prime component of the “liquidity cycle” and its bottom was 4.3 days later than FXE, at noon on June 4. That happened to be the 245th day of the Master Cycle and I will be using that date as the beginning of the new Master Cycle in the financials and the euro. The pattern is complete or nearly so on calendar day 13 (today). Intermediate-term Cycle trend resistance and the hourly Cycle Top resistance are directly overhead. Note the tiny triangle pattern at 14.2 that tells us XLF is in its final move.

Today is also day 13 (almost) since the Trading Cycle low on June 4. To be precise, we need 12.9 days to complete this cycle and so far it has completed 12.6 days as of today. That means SPY may have another two hours to its peak on Monday. The maximum it can go in this alternate scenario is 134.44 to make a double zigzag wave [2]. I’ll report more on that scenario tomorrow morning. Remember, SPX did make a new high at Friday’s close, so it wouldn’t be too difficult to bring SPY along with it in the morning. Failure to do so, in fact, would be very bearish.

GLD’s cycle is 7 calendar days (4.3 market days due to Memorial day) earlier than the FXE cycle and 13 calendar days earlier than the XLF (liquidity) cycle. It’s Master Cycle low was on May 23. This one also fooled me for a while. Master Cycles never, NEVER land on minor waves B, but it is too easy to pick the lowest spot for a Master Cycle low…

The October 4 low (lowest low in 2011) in SPX/SPY was an Intermediate wave (B). The domestic equities Master Cycle low landed on August 9, instead. It’s not always the lowest point in the chart that gets awarded the Master Cycle Bottom label. Usually what happens is that, if one is “off cycle,” the subsequent highs and lows are not divisible by 4.3. One thing to look for in major cycle lows is to have similar ETFs confirm one another. QQQ and SPY both confirmed the bottom on August 9, but did not on October 4.

Tomorrow is calendar day 26 for GLD. (25.8 in the cycles). Based on that, I expect GLD to go slightly higher, possibly above the neckline, but probably not higher than 158.75, so the pattern seems to need only one probe higher to be complete.

I hope your Father’s Day was a good one. That’s all for now.

Good luck and good trading!


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Disclaimer: The content in this article is written for educational and informational purposes only.  There is no offer or recommendation to buy or sell any security and no information contained here should be interpreted or construed as investment advice. Do you own due diligence as the information in this article is the opinion of Anthony M. Cherniawski and subject to change without notice.

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