The week of 02-21

Took a look at the futures as the market was closed today.  With all that was going on in the ME (Libya a major oil producer in particular) the futures were red and oil up as one would expect.  Is this the catalyst to reverse the market for the time being?  Maybe we find out on Tuesday (the European markets were down today).  Interesting that CNBC had people in reporting on the ME situation all morning.  Don't worry about Libya - the Saudis have plenty of capacity to make that up (or so seems to be the party line).

As I have indicated the past couple of weeks I believe we should be at a point where we get a trend reversal.  It may only be for 4-8 weeks, but to go much higher the market needs a correction to reset expectations.  Everyone is on edge waiting for that correction and unwilling to commit more on the long side until that happens.  So in that respect a correction is viewed as a positive by the bullish.

The cycles keep topping so sooner or later we get that correction:

• The 10 year cycle is down  (Juglar cycle - 3x the Kitchin cycle)
• the Kitchin cycle (41 months) is down
• the 2 year (24 month cycle) is up
• The one year cycle is down
• The 7 month cycle (just topped)
• the 20 week  (Wall) cycle is down
• the 22 day cycle is down
• the 11 day cycle is down 2 more days

So what is keeping the market up?  The FED may interrupt the natural flow of the cycles on a temporary basis, but don't fool Mother Nature - it ain't nice.  So with all that is going on in the ME we have the perfect excuse for a cyclic downturn.

Here are the charts:

GL traders.  Do your own analysis.

sector analysis (cont)

I took the 12 sectors I did projections for and plotted them on a timeline.  This more clearly shows what should lie ahead.  We have a cluster of sectors expected to bottom in Mar/Apr.  This should be the first leg of any correction.  By May these sectors will have turned up.  We have 2-3 influential sectors bottoming in May though so this may create some volatility.  By the end of June (early July) we have many of these sectors topping again.  So we could get a second leg of correction in Jul-Sep.  Time will tell.

Here is the timeline I construction for the 12 sectors I examined:

There is no guarantee the market will work out a projected.  Still - I have tried to provide you a possible trajectory over time.

GL traders.  Do your own analysis.
 

Sector analysis

Cycles keep topping (or so it seems) as they hit the time lines where tops should occur.  Yet, the market keeps advancing.  So what is going on?  Cycles seem to work reasonably well for individual issues, but not for the indexes.

With this in mind I decided to look at sectors.  Could this give us a clue as to what is happening underneath.  What appears to be happening is that we have a strength moving from one sector to another and this is pulling the market higher.  At some point his process should reverse.  For example in December retail and financials seemed to be leading the market.  Now it appears commodities, manufacturing, technology has taken the lead (with financials and retail lagging).   So we have a rolling advance.

I did forward projections on 12 sectors.  I appears some of the leading sectors are overdue a correction.  If my projections are right then it appears we should have a cluster of sectors bottoming in Mar/Apr. 

Here are the 12 sectors I did projections for:

If you examine these projections you will see that they are not projected all to bottom together over the next 4-5 months.  So just as we have had a rolling rally it appears chances are good we will not have a sudden and deep correction, but a rolling correction over the next 4-5 months.

Gl traders.  Do your own analysis.

Comments and 02-18 outlook

Again it came down to a "guess the open" type day.  We opened down and then saw the expected move up.  The afternoon and close a little stronger than expected.  Still not a bad call for the day.

Tomorrow we should have the 5 day, 8 day and 11 day cycles up and topping by Tue next week  The shorter cycles are down most of the day.   Expect these 3 longer cycles to set the aura for the day and the market to move up most of the day.  May get a push into the close as 2 of the 3 short cycles will have bottomed during the day.

Here are charts:


GL traders.  Do your own analysis and keep those stops in place to protect profits.

comments and 02-17 outlook

The Game seems to be "guess the open".  Seems the past few weeks if you could guess the open you called the market for the day.  I suppose it is cheaper to control the market with off hour futures (if there is any funny stuff going on).    Happened today...  Again....  Other than the first hour my call was not bad for today.

Tomorrow it appears we have a majority of the short cycles up for at least the first half of the day.  If the premarket futures cooperate the bias should be up for the first part of the day.  By midday a couple of cycles turn down.  So it should start to the upside and falter midday and go sideways (maybe some down bias).

Here is the chart:

GL traders.  Do your own analysis and keep stops in place.

Comments and outlook for 02-16

Some red on the tape today - all 3 indexes.  We speculated with short cycles down this may happen.  Unsure if this is just a short term "blip" down or the start of something bigger.  Use care and keep your stops in place.

Tomorrow we start off with the short cycles down so we may get some continuation.  By afternoon the 2 shortest cycles turn up.  So we should see a down bias first half of the day and sideways the second half of the day based on the shorter cycles.  Of course, if today was the start of a bigger correction the entire day could be downward biased.


Here is the shorter cycles:

Gl traders.  Do your own analysis....

New articles on cycles

http://www.safehaven.com/article/19990/crisis-high-2011

http://www.safehaven.com/article/19979/tracking-individual-stock-cycles-in-price-and-time

Enjoy.