Friday, November 12, 2010

11-13 the week ahead as I see it

As a dominant cycle reaches a top it exerts less effect as it starts to flatten out before turning down. This means less influence on the direction of the market. It also implies that the shorter cycles should exert more influence and a larger effect on market movement. So instead of day after day after day of the market moving up with a rare down day thrown in you get fewer up days and more down days. This makes for a better short term trading environment, but it also makes timing moves trickier. You get increased volatility both up and down.

As the topping process progresses you start to get more down days than up days. Just realize though the topping process for a longer cycles can be several days (2-3 weeks or more). In other words longer cycles have a longer turn radius than short cycles so we should not expect a sharp sell off the day after a long cycle tops, but a slow start that gains downside momentum over time.

So this past week's move down may be reversed during the next week to a large extent (and possibly completely). I expect the first couple of days to remain weak as a couple of short cyces bottom and should turn up in the last half of the week. That implies the latter part of the week should show some upside potential.

As always this is the my opinion and should only be used in conjunction with your own analysis. Here is a chart showing two of the shorter cycles and how they play out next week.

UPDATE 11/15:  The forecast looks reasonable this week (I omitted it last week because it did not look reasonable - and it wasn't)  IMO:

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