Friday, August 5, 2011

Looking back at the week of 08-01-2011

The extent of the sell down definitely exceeded my expectation at the beginning of the week.  Of course, I thought we would turn by mid week - which did not happen.  So I thought it would be wort while to try and identify what I missed.

To begin with there was the news out of Europe.  News can always be fly in the milk.  We don't know what the news will be or when it will occur   I believe the news out of Europe did impact our markets.  I also believe by the end of the week (new plan from the Euro zone)  much of that impact was taken out of the market as shown by the recovery off the mid day lows.

So I went to and charted the DPO (Detrend Price Oscillator - attempts to remove oscillation of market due to cycles).  I was using the S&P. I detrended for the 20 week cycle.  Now I had anticipated that this cycle would bottom end of next week or early the week after, but it now appears it bottomed this week.  I detrended the 34TD cycle which bottomed mid week.  I detrended the 22TD cycle which topped Monday.

As a result we see the 20 week cycle contributed about 110 points of downside since its top (mostly in the past 1.5-2 weeks).   The 34TD cycle contributed about 80 points of downside since its top.  That is 190 points of downside.  The 22 day cycle contribute around 44 points of upside during this period.  So we have 44 - 110 - 80 or 156 points of downside over the past 3+ weeks since the top around 1356.  That gives us an objective of around  1200.  That leaves about 40-50 points of downside/recovery due to news.  So that means we overshot (and recovered) about 50 points to the downside.

Here is the chart of SPX from stock charts showing what I said above:

I want to thank Shadow7 for his suggestion I had the bottom of the 20 week cycle positioned incorrectly.  I encourage other readers to raise issues when they feel I may have missed something or am not interpreting data correctly.  I believe though if you study the chart it does explain the past week.
Hopefully I have learned from this......  

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