Friday's Market Represented a Trading Cycle Low

Stan Harley |

Trading Cycle Low Friday

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I have been targeting the time period right in here for my next 39.8 / 79.6 TD cycle low. At 64.4 trading days from the October 15, 2014 low, Friday’s intraday reversal – a break to marginal new lows followed by an across the board surge to the upside leads me to believe the cycle low I was anticipating (which I misidentified as being due today – oops – a holiday). Friday was my ideal turn date and I believe we got it.

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Back in 2010 I began to develop my theory regarding cycle counts and their derivation stemming from dividing the Fibonacci series by the square root of five. I continue to find overwhelming evidence of the validity in this theory. And it doesn’t matter whether we’re talking about trading days, weeks, months, or years. The same numbers pop up time and again. But cycles expand and contract – which makes my job challenging to say the least. The 39.8 / 79.6 trading day series is exemplified on the S&P chart above. In black I have denoted the time counts in trading days for the series of lows over the last year. Note the variance – 21 to 58 trading days. Note also the average:  right at 39.8 trading days. And 39.8 TDs from today yields a very interesting date.

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Long Term

On a very long term basis, I have found strong evidence of an 84.3 year cycle of highs emanating from the Dutch tulip mania of February 1637 – just a smidge over 377 years ago. At 86 years from the 1929 top we are right in the heart of the envelope for the next occurrence in this high-high market rhythm. I’ll have charts and analysis in future issues to illustrate this.

In the January 9, 2015 issue of the UPDATE, I showed my analysis of the structure in play from the 1929 top. The analysis reveals a monthly rhythm of highs averaging right at 318.4 months. That 318.4 month cycle is due to resolve this year as well. Pinning it down to the month, the week, the day – that is my challenge.

What Date to Use for the 2000 High?

One area of complication in analyzing the patterns from the 2000 series of highs is: What date to use for the 79.6 month cycle top?  The Dow peaked out on January 14 of that year, the NASDAQ and S&P in March, and finally the New York Composite printed the final high on September 01, 2000. What I’ve done is work my way backwards from the pair of lows in late 2002 and early 2003 to arrive at a workable answer. I know from experience that retests of prior lows are prone to occur in 100 – 110 trading day periods. The operable function here would appear to be 104.2 trading days. I note that the 10-Oct-2002 and the 12-Mar-2003 low were separated by 105 TDs [104.2 TDs]. By subtracting 714.2 TDs from the 12-Mar-2003 low and 610 fibonacci days from the 10-Oct-2002 low I arrive at 04-May-2000. While that date doesn’t appear to mark either a major high or low, I found that by adding and subtracting time counts from this date the patterns work out beautifully.

In examining the time cycle counts from previous prominent high and low points I am seeing what appears to be a very interesting clustering in-and-around the March 17-18, 2015 time period – on a short term basis as well as on a long-term basis. On the monthly S&P chart above, note the trading day counts emanating from the 04-May-2000 high, the 12-Mar-2003 low, the 11-Oct-2007 high, and the 06-Mar-2009 low – producing a marvelous clustering in-and-around March 17-18, 2015. This just might be our Bull Market Top?

The Dow Jones Industrials exemplified an intraday reversal today – first by printing new lows for the move and then rallying sharply to close right on the high of the day. I also note the structure in-and-around the 17,500 level – a major price octave in my work. While trading briefly below that level, the Dow Industrials have snapped back to close essentially right on that level. That type of action indicates 17,500 is providing underlying support. From here, I look for the DJIA to lead this market higher for about the next 39.8 trading days. The March clustering I have identified looks very appealing for what could mark a major, major top. 

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Treasury Bonds

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New all-time lows in yield today – and new all-time highs in the TLT Exchange traded fund as well. But I note the intraday reversal for this ETF. Price is well extended and I look for resistance on the chart to temporarily stall this move to new highs in the bonds and new lows in TYX.

 Precious Metals

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Comex gold is undergoing a structural back-and-fill evolution right at the 1,250 level – a major price octave in my work. I also note that price on the monthly chart has nudged back up against the still-downtrending 20 month moving average. Something has to give. A stall-out here perhaps.

 

 

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 January. 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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