Monday, April 25, 2011

May 2011 - the month ahead

I read one theory that the longer cycles have most of their down thrust in the last 15% or so of the time span.  In the case of the 1 year cycle that would be the last half of May and June into early July.  So based on this theory we should start seeing a more pronounced impact of the 1 year cycle within a couple of weeks. 

So the "sell in May" may be appropriate, but it appears we get one more push up before we see that impact.  If we do not see that push up then the sell down into the summer may be more severe than currently anticipated.   We also have a 4+ month (20 +/- weeks) in play and it should also top by mid-May.    We have a 1 month (22TD) cycle which should bottom in mid-May and top by the end of May and bottom again in mid-June.

Here is the visual:

When we combine the cycles with the chart patterns (some call these fractals) we see an inverted Head an Shoulders pattern (the low in mid-March is the Head, and the recent low is the Right Shoulder).  This also implies a push higher.  Now patterns are the result of the interaction of cycles and can be explained in terms of the cycles we currently see.

This visual shows that pattern and how it is formed by the current cycles:

So, it appears we get a push up the first part of May, and then we start a sell off that could last into the summer.  GL traders, do your own analysis.

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