Tuesday, January 4, 2011

01-04 January outlook

Time to take a look at January.  My December outlook was definitely too pessimistic.  Hope I do better on January.  The 41 month cycle topped mid November and is down.  The two year cycle is down and should bottom second half of April.  The 1 year cycle is up the first 2.5 weeks of January (1/19 top?) before it turns down.  So by late January we have 3 long cycle down.  May give us some downward bias the last 1.5weeks of January,  For now though the 1 year cycle seems dominant as it pushes higher to a top.

So looking at the longer cycles it appears upward bias the first 2 and half weeks of January and a downward bias the last week and half of January.  Here is a SPX chart showing the longer cycles:

Now to look at the shorter swing cycles.  The 20 week cycle is down and should bottom next week (1/11?).  The 34td (trading days) cycle should bottom also next week (1/13?). the 22td cycle is up and should top next week (1/14?).  So two cycles up, 2 cycles down - they largely offset.  Maybe a slight bias down.  Not enough to give us much dowside action though the first part of January.  Here is the SPX showing the Swing cycles:

So, January is mostly sideways (a trader's market).  Maybe up to 1280+  by  1 year cycle top (1/19?).  Buy the dips of 1-2% and sell the pops.  Don't get greedy expecting big moves either way.  GL traders   


  1. Your January Outlook has been spot on. It looks like we are turning down..but for how long? The forecast has the SP falling to 1100 until May...a long time (5-10% correction which everyone is looking for)...but...what about the POMO, The BernANKe, and Obama effect. They want stock prices to go higher.

    If we continue lower to 1100 we would be basically giving back all the gains from the September '10 rally. From market psychology how would this affect peoples outlook? But this might also give the money on the sidelines a chance to get back in.

    Again, POMO, The BernANKe, and Obama effect want stocks to go higher...

    So if we don't continue a downward trend through 1260 -1250 might we just consolidate in a range between 1250 and 1300 until May or...I see a correction similar to what happened at the end of November. What is the larger cycle that is carrying us that we touched July, September, November, and it looks like we will hit it again? It looks like we are on the back of a 3 year upswing in a 6 year cycle based on time period between 2003-2009. Also did we top a 3 year cycle in August '10? If this is the case we should be good all the way into 2012..which would line up with all the chatter about the market reaching 1400-1500 range?

    It seems the Bradley dates are working in reverse polarity from what was posted in December...which means we turn up on the big February 17th date. If this is the case then we climb higher pretty fast and then wallow for the rest of the year.

    Once again thanks for your blog.

  2. Shadow7 -

    Lots of what ifs. I'll do the best I can to respond.

    Last item first - Bradley dates mark pivot dates and as I understand it they are directional agnostic. In other words you could have a pivot up, go up then sideways and then pivot up again without ever pivoting down. In other words dates to watch for a market a change (hopefully you have other info as what direction to expect).

    As to POMO, Bennie and Barry - that is pretty much in the fundamental arena and I try to keep my analysis as close to "pure" TA as possible and ignore the news and noise (ie chatter on CNBC). I realize news can mark a change in sentiment as cycle pivot points are reached, but my experience tells me too much good news can mark a top (priced to perfection?) as well as negative news. So a lot of times it is hard to interpret news, fundamentals and effect.

    As to cycles you mention - some cycles are more dominant and consistent than others. The Dewey/Kitchin cycle (around 41 months) is considered by many to be the most dominant cycle. The 10 year cycle probably ranks up there with the 41 month cycle. Finally the 2 year cycle is also considered dominant by Daniel Fererra. So if you are watching longer cycle watch these three.

    So, the 10 year cycle is down and should bottom in the spring of 2012, The Dewey/Kitchner cycle is down and should bottom about the same time as the 10 year. The 2 year cycle is up and should bottom in 2012 within less than 6 months of Dewey and 10 year cycle. So we have 2 of the 3 dominant cycles down and the 3rd one should turn down before the end of the year(best guess is before Sept?).

    The 1 year cycle topped (I believe) and has turned down. The 20 week cycle should top before the end of the month. Given 2 of the 3 dominant cycles are down we should experience some market wakness Feb/Mar and into mid-Apr. How much weakness? Normally we will see a 10% or more correction given the current cycle setup. Only time will tell if we do this time.

    BTW - Make sure you read this weekends posts on the Kitchin and Wall cycles and look at the charts. It may answer some of your questions.