Seeking Evidence …

August 22, 2013

The daily equity cycle peaked on day 28 and had been in decline since. Wednesday was day 41 and saw stocks print the lowest point since the daily cycle peak. Thursday stocks formed a swing low.

The daily equity cycle averages 35 – 45 days from trough to trough. The swing low printed today quite likely will mark the daily cycle low. We like to see a break of the declining cycle trend line to confirm a new daily cycle. Since a trend line break is about 20 points higher, I thought that we can find other evidence to support the notion that the daily cycle low just printed.

The transports printed the lowest point of their cycle decline last Thursday. A swing low formed on Friday. However a clear and convincing trend line break did not occur until today confirming that the transports are now in a new daily cycle.

The Advance/Decline index had been declining in sympathy with stocks since early August. The AD Index began to diverge this week and printed a reversal today, providing more evidence that the daily cycle low is in.

Since this new daily cycle is following a right translated daily cycle our expectation is to see stocks print a new high. But we need to be cautious. As we have been discussing, the yearly cycle is getting long in the tooth. Stocks are currently in the third intermediate cycle of the year. Since the previous intermediate cycle ran long, we need to be on our toes for a shortened intermediate cycle to balance things out. Therefore it is quite possible that this new daily cycle will form as a left translated daily cycle.

So we will be watching to see if the new equity cycle forms as a left translated cycle. Because if it does, then I believe that …

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7 responses to “Seeking Evidence …”

vorfahrt

August 22, 2013

Thanks LM. You help us a lot finding the markets where the most promising moves will take place. For example now, I’m much more excited about gold than stocks medium term. Interesting times ahead.

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Trond

August 22, 2013

Hi! Tom McClellan writes about the weekly gold cycle in his latest, even mentions the left/right translation importance + a very interesting other observation, what do you think?
>>I mentioned that I don’t know why gold exhibits this very regular 13-1/2 month cycle. But I do know that there is a very real and important anchor which seems to control its regularity. You may have noticed that these charts show a rather funny looking representation of a sine wave cycle, with bars instead of a wiggly line. Those bars have an important meaning: They represent the distance between the earth and moon on the day of the full moon. So the 13-1/2 month cycle which is evident in gold prices just happens to match up really well with the lunar apogee-perigee cycle. Or at least it has for a couple of decades, which ought to be long enough to establish it as a real phenomenon. <<

http://www.mcoscillator.com/learning_center/weekly_chart/golds_13-1_2_month_cycle/

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1. likesmoneystudies
  
  August 23, 2013
  
  I found this to be very interesting especially how he split the yearly low for gold in 2 in 2012. I did not realize how well gold’s yearly cycle matched up with the lunar apogee-perigee cycle. And I agree with his closing statement that it doesn’t matter how it works, if it works 🙂
  
  Reply
likesmoneystudies

August 23, 2013

LM,
“The dollar has done a pretty good job of disguising its daily cycle count during this decline. ”
Can the Euro help us out here? Where is the cycle count on the Euro?
http://www.imagebam.com/image/fd77e2271713726

Joe I carried your question forward to answer it here.

image hosting 30 mb

The EURO looks like it printed a right translated DCL on 8/15. That makes Thursday day 5.
Back the the dollar. One of the things that I look for is what I term a clear and convincing trend line break. While the dollar delivered a trend line break yesterday, it was not clear and convincing. The lack of follow through may mean that yesterday was a head fake and the dollar will make its final descent into a daily cycle low.

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likesmoneystudies

August 23, 2013

LM, could bonds also start a new DC here? Impressive rally today.

Joe,

Bonds do look like a DCL could have formed on Thursday. Wednesday was day 14 and Thursday formed a swing low. There is also a bullish crossover on the TSI We will need to see some follow through to be certain.

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vorfahrt

August 23, 2013

Thanks, LM. Bonds follow through, the US$ not. PMs soaring again. Awesome.

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Joe

August 23, 2013

No SoS numbers to mention yet. I think stocks still have some room to move up.

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