Sunday, June 22, 2014

Jun 23, 2014 weekly outlook

To understand cycle translation you first have to determine the  length of the cycle. Let's examine  an intermediate length cycle in the stock market.  That cycle is around 20-24 weeks trough to trough (wall cycle?). The median being 22 weeks. If we divide 22 weeks by 2 we get 11 weeks. That is an point at which there is no translation. It is the dividing point between a left translated and right translated cycle.

Any cycle that tops on week 12 or later is right translated, Right translated cycles are the found in bull markets. In other words - cycles spend more than 50% of the time advancing (bull market).

In a bull market an intermediate degree correction is a profit-taking event, and that's all it is. The talking heads on CNBC or Bloomberg  will find some  reason for why the market is correcting but the market has just moved higher long enough that a corrective move to consolidate the gains takes place. Bull markets are made up of multiple right translated medium length cycles.

Left translated cycles, are featured by markets that are in trouble. A left translated cycle is a sign that the market/economics are broken, or in the process of breaking. A left translated cycle is not a profit-taking event. A left translated cycle is a sign to short the market or stay on the sidelines.

So based on this we should see right translated cycles since early 2012.  Let's take a look:

Notice we are late in a cycle and appear to be at/near a right translated top.  Looking at a daily chart we see the medium term cycle is now past its mid point and if it were uniform neither right or left translated) it would have already turned down.  of the other shorter cycles - one is up, one is down and one is topping (sideways).

If the right translated cycle is at a top then we should see a down bias in the market this week.  So best guess is down 1 1/2% or so for the week with possibly minor upside Monday.

GL traders

No comments:

Post a Comment