A Trading Cycle Low, then Back to the Bull

Stan Harley |

Chop Shop

I'm calling for the next trading cycle low in the vicinity of April 3. Below is a chart of the Dow Industrials depicting a 0.382 - 0.618 - 1.000 Fibonacci ratio analysis of the trading cycle lows since October 15, 2014.

DJIA_3_16.jpg

The pattern would suggest the next more important trading cycle low in the vicinity of April 3. I see us making a low on the daily charts right in here, with a chop-shop p-side bias for about 6-8 TDs, then back down into April 3 – essentially forming an A-B-C corrective pattern off the Feb. 25 2015 high (basis SPX).

The NASDAQ Composite tagged the all-important 5,000 price octave at the late February/early March highs. I expected some type of retracement off that level before this index again resumes the march to new highs. Yes, new highs for the NAZ Comp. That’s coming soon, but probably not until after the early April low. 

Nasdaq_3_16.jpg

My plan is to hold BULLISH into about March 24 – then revert to BEARISH for what I evision as a short – but sharp – price drop into the vicinity of April 3 – at which point I plan to advise BULLISH once again with the expectation of one final ramp-up into about May 11-14 to seal the deal on this bull market. But remain flexible…

As readers know, I’m looking for the next trading cycle low in the vicinity of April 3. But before we get to the next low, we have to reach the next high. So at what date on the calendar should we expect that next “high” to occur?

S_and_P_500_3_16.jpg

I use both cycle counts as well as Fibonacci counts for my turning point predictions. I recently noticed a pattern of inflection points occurring at roughly 36 trading day intervals and multiples thereof. While the number 36 is not a cycle number per se, it is a fraction of the Fibonacci number 144 and, as such, appears to be the defining constant in a pattern of inflection points that began at the February 5, 2014 low.

On the S&P chart below, I depict these inflection points that have marked either high point reversals or low-point reversals. I plugged the data into my spreadsheet to find the best least-squares fit of the data (“regression analysis”) – the analysis points to March 24 as the next likely point to expect my target high. The standard deviation on that is less than one day. In addition, the analysis points to the May 14 time period for the subsequent occurrence – right in line with my “May 11 major high” forecast.

S_and_P_500__Regression_Chart_3_16.jpg

Precious Metals

Comex_Gold_3_16.jpg

 

On the chart above, I have placed a vertical line at the August 2011 high and another line at the initial low in early 2013. That first low occurred 94 weeks from the high – probably a slight expansion from the number 89 count – a Fibonacci number. I know from experience that high-to-low moves and low-to-high moves typically span Fibonacci numbers or their one half values. Adding 377 / 2 = 188.5 weeks to the August 2011 high suggests we should be alert for the next low in the metals some time in the next 2-4 weeks.

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Each month, Stan Harley publishes TheHarley Market Letter, a newsletter that provides advanced technical analysis of stocks, bonds, and precious metals. This is the latest update to the Harley Market Letter for March. Want to learn more from acclaimed market analyst Stan Harley? Visit his site and subscribe to the full Harley Market Letter

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