Choppy Trading Environment
Higher lows, higher highs for the DJIA, S&P; higher lows, lower highs for the New York Composite Index. A potential Rule of Four pattern may be under development for the NYA as well. And, again I note the NYSE Advance/Decline Line etched out a new, all time high on December 29, 2014 while the index on which this data is based – the NYA – did not.
But despite the technical concerns I have noted above, I’m going with the bullish picture. A long-term 318.4 monthly cycle I have found defining the separation of highs suggests we still have some life in this bull market. In the short term, though, I’m inclined to believe we may be looking at the potential for a trading cycle high next week. On the S&P chart above, I have placed numbers above each trading cycle crest. These numerical counts denote what I call the duplex function – the time summation of two consecutive 39.8 trading cycles. The two recent duplex cycles have spanned 94 and 90 TDs. A contraction to 79.6 TDs for the next duplex cycle would point to the next high in the vicinity of January 13. If that were to happen, the next trading cycle low would contract as well.
DJIA – From 1900
I showed this log chart above of the Dow Jones Industrials from 1900 in my recent monthly letter. In closely examining the structure, I recently uncovered a cyclical function averaging 318.4 months – roughly 26.5 years. The cycle would appear to have the November 09, 1903 major low as its Genesis Point. Cycles that spin-out high points tend to have a significant low as their Genesis Point I have found.
I note the time period between the November 1903 low and the January 2000 high spanned a total of 1,154 months – nearly matching the 1,152 months my theory would suggest.
Below I show my regression analysis of the significant high and low points spanning the time period from the September 03, 1929 top. The regression analysis reveals a slightly expanding 318.4 month pattern. Although the regression analysis points to March 2016 for the next major high, I’m inclined to believe – based on the contracting pattern since 2000 – that the high in this series is more likely to occur early this year. The time period right around March 11, 2015 starting to look very interesting – I’ll have more to say on this in future issues…
The recurring pattern of 49.2 and 79.6 trading days I previously discussed appears to have coincided with the most recent high on December 29. The next occurrence – should the pattern continue – lines up with the March 11 time period. I’m now finding numerous confluences in-and-around the March 11, 2015 time period. We’ll need to see whether or not this next trading cycle contracts. My expectation right now is that it will – leading to a shortened time period for the next low. What does it all mean for you and me? A choppy environment in the days ahead proving frustrating for both bulls and bears alike.
Continued choppy action with an upside bias. Gold closed today at 1,217 – I look for 1,250ish before this counter-trend move runs out of gas. At that point I will likely reissue my bearish outlook on the metals. For now, stand aside.
Each month, Stan Harley publishes The Harley 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 December. 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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