Platatudes - Cyclical Trading Journal

USDCAD -- Dollar/Loonie

2011-06-08T18:07:00.000-07:00

I'm checking out the USD/CAD here in this post.

Sigma Lambda

4.5 year (54 month) cycle

My analysis has us on a low on 11/8/2007 -- that puts us very late in the cycle (in the last third of the 4.5 year cycle) -- bearish.

18 month cycle

Right now there is a suspicion that we went into an 18 month low on May 2nd. We would be in the bullish phase of the cycle right now -- bullish

40 week cycle

This nested with the 18 month -- early in phase -- bullish

20 week cycle

This nested with the 18 month -- early in phase -- bullish

80 day cycle

This nested with the 18 month -- close to peaking -- bullish

40 day cycle

My 'best guess' right now has this dropping into a low sometime around 8am Sunday. The last best fit puts the nominal 40 day at 44.4, but the 40 days is on the 11th. It's *possible* this is already in, but I don't believe so. So for the remainder of this week it's quite -- bearish

20 day cycle

The 20 day cycle is possibly synched up to drop into a low with the 40 day on Sunday, however, the daily chart has this approximated as possibly coming in a day early on the 10th (Friday) -- bearish

10 day cycle

4 hour chart is estimating at or slightly before the 20 day nesting -- bearish

5 day cycle

For some reason the 4 hour estimates this will complete in 4.3 days and should be completing right about now. -- dangerous, but possibly bullish, for now, i'll say, 'neutral'

2 day cycle

My two day cycle count from the 15 minute chart puts the cyclical nest at 0945NYC time tomorrow the 9th of June -- bearish

1 day cycle

2nd one day cycle of the 2 day cycle is peaking and going into a nest at 0945 with the 2 day -- bearish

5 hour cycle

We're seeing a 5 hour low before the 3 day cycle low coming in late tonight... for some reason (missing trading hours) there are not as many bars as would be expected before tomorrow's 0945 expected low -- more details needed on this i think.

alternative cycling

an alternative cycling is seeing the usd.cad as this:

16 hour low in at 0230-0245 ish NYC time on the June the 9th.

Gold Update

2011-06-06T19:01:00.000-07:00

I was finally able to do a rudimentary initial daily analysis on August Gold with the INVERTED analysis pattern suggested by some cyclical analysts for gold (and other commodities).

I am looking over the daily and here is what we have:

20 week 'nested' peak is showing up at May 2nd. While it's possible we are sitting right on a nominal 40 day peak, there are not nearly as many reinforcing waves as there were during the 20 week cycle which had every lesser cycle synched up to peak at the beginning of May (sell in May, go away, lol)

if this analysis turns out to be valid, I would say that last night's high would more than likely be the high for this week and we really shouldn't be expecting too much from the bullish side in Gold this week, with an outside possiblity that the 40 day cycle did not peak as early as predicted and will crest with a slightly shorter cycle set to peak tomorrow-ish

Monday EOD Report, Gold EURUSD and ES

2011-06-06T18:42:00.000-07:00

Gold spiked higher last night (up to 1555ish) on the August Futures, and EURUSD and ES continue to grind lower.

I think that a short (yesterday) was a good trade on the ES, but couldn't get a cyclical model I was happy with, so decided that caution was the smart trade.

I have a tiny position in Aug Gold and no position in either the EURUSD or USDJPY.

My cyclical analyzer is messing up terribly so I'm getting a lot of half-baked analysis trying to get the GC# or the Gold Futures continuous chart.

Most of my charts show that gold should actually be higher this time tomorrow (again) so I'll stick with it, though I have some light doubts about the validity of my cyclical model for GC as well.

-out-

August Gold QMGC#

2011-06-04T20:27:00.000-07:00

I have a light position in this. I'm actually moderately in the 'green' after getting an outrageously bad fill on a buy -- my fault -- see my earlier post in this regard.

I have it sitting at: 1542.40

The immediate issue that I see is that there is a Valid trend line on the 80 day cycle that come Monday would be providing overhead resistance to August gold. In fact, it's a bearish trend line and the longer the week goes on, the lower the resistance point.

On the other hand, the same cycle has a bullish trendline somewhere (way) down around 1505 - 1510 ish depending on what day next week (if we were to head down next week).

So let's start from the top -- From the daily chart:

Sigma Lamba (or the sum total of all cycles greater than 20 day cycle)

I have a small problem here in that I'm analyzing August (2011) Gold versus the continuous contract. Therefore, I have no data to analyze the longer cycles, longer than 20 weeks, that is...

For the purposes of our discussion, knowing what I know about the gold market I will call all longer than 20 weeks "Bullish" (in other words, in an uptrend, but without knowing where they are in their cycle).

20 week cycle -- this looks to me like it is peaking or moving past it's peak, and set to hit a cycle low again sometime in August.

80 day cycle -- Bullish

40 day cycle -- Peaking

20 day cycle -- This (should have) nested over the weekend and be pointing up up and away on Monday. The current structure and the cross of the FLD seems to indicate a run at 1600 during the NEXT twenty day cycle...with a small possibility of threatening that price in THIS 20 day cycle.

10 day cycle -- pointing up, peaking around Thursday

5 day cycle -- peaking on monday, nesting end of wednesday, and back upwards by thursday

From hourly chart:

2 day cycle -- nesting sunday morning

1 day cycle -- nesting monday a.m.

If the cycle counts are to be believed next week should be BULLISH for gold. I have no idea how that idea plays into the downward facing VTL up around 1543...and I have yet to do a reverse (reinforcing cycle tops versus reinforcing cycle bottoms) but some other cyclical analysts have suggested we should have or should be topping in here.

I will hold my small bullish position, and PROBABLY place a stop under it. If i get stopped out on volatility I will look to replace my bullish positon at a more favorable price, though it might not be possible.

I am just very concerned about taking major pain/hits without a stop, regardless of what my cycle analysis says, because gold has been notoriously difficult to predict using nested LOWS type cycle analysis.

EUR/USD -- A New Week, An New Perspective

2011-06-04T19:28:00.001-07:00

The action in the EUR/USD ended up being quite bullish last week.

As it so happens, before I did the weekend analysis last week, I had a rather hefty position long the dollar index futures (DX) and took it in the shorts before I could exit the position.

Luckily, I did so pretty quickly and 'flipped the script' and went long -- via the EUR/USD pair, not by shorting the DX futures contract.

It's time to begin my weekend analysis. Unfortunately, I have a lot more study to do in regards to my cyclical analysis tools, so I'm still not 100% sure on the accuracy of these predictions... So, if you're crazy enough to find these posts, follow them at your own financial peril. I'm not really linking this up anywhere, so the chances of anyone finding this right now are thankfully pretty slim. It's more meant for a journal for myself.

EUR/USD -

54 Month - bullish
18 Month - bearish
40 week -- peaking/bearish
80 day -- bullish
40 day -- bullish

If the daily cycle count is to be believed, we hit a 'possible' 20 WEEK cycle low on the 23rd of June. sum of all cycles greater than 20 day i'm going to say is, 'bullish to neutral' since I have a bullish cycle all the way up to 40 weeks.

20 day cycle -- This is the cycle I'm trying to trade on a weekly basis. The twenty day cycle will be in its latter third almost all the way through Thursday-ish. While the longer cycles are looking bullish, this would suggest that the EUR/USD could take a breather next week, and perhaps be pressured downward throughout the week, until Friday (assuming longer cycle ranges don't dominate). Either way, big bullish bets should be taken with caution or perhaps not at all until the 20 day low is put in a new bullish cycle is well underway the week after.

10 day cycle -- if the cycle count is to be believed the 10 day cycle will be nesting on or about Thur/Fri, so this cycle suggests caution with any bullish position

5 day cycle -- this cycle appears 'off phase' with the longer cycles and analysis suggests a cycle low early a.m. Tuesday.

To the 15 Minute Chart --

For better or worse, I don't have total agreement between the cycle count on my daily and my 15 minute chart yet. My 15 minute chart shows that the 20 week cycle is anticipated as the same time (June 23rd), but is reading the nominal 20 day cycle as being shorter -- 16.6 days. This would tend to reinforce some of the shorter cycle elements from the daily though...so...

20 day cycle -- quite bearish, and actually bottoming on late Wednesday perhaps (early)

10 day cycle -- peaking Sunday night and turning slowly bearish...bottoming between Thursday/Friday as the longer term daily chart suggested

5 day cycle -- bottoming Sunday night and turning decidedly bullish for the remainder of the week.

2 day cycle off phase with the 5 day and not bottoming until monday midday

1 day cycle -- off phase with the 5 day and not bottoming until Monday midday, also

In summary, regardless of the strong action to close out the week, I don't like this as a strong bullish play until the end of the week, and I don't like this as a bearish play into Thursday because of what I perceive as a bullish underlying trend on the longer cycle lengths. I will start out Sunday by standing pat with my minimum bullish position. 1 unit. I'm expecting bearish moves, and may close it out, but don't feel overly threatened by any short term losses I would take before an expected rebound the week after.

Unfortunately, the 20 week cycle looks like it would maintain it's valid bullish trendline all the way down to 1.41...5 cents + below where it closed out Friday. 1.4633.

Weekend Swing Shortening

2011-06-02T17:59:00.000-07:00

Late last night, I took down some of my EUR/USD longs. The security continues to march upwards and it is supported by the supposed bottoming of some longer term cycles, in addition to the bottoming of the nominal 10 day cycle yesterday afternoon.

However, I trimmed down my position, because I'd like to hold onto the gains for this week.

In addition to the smaller EUR/USD position, I'm holding a loser in the USD/JPY and a marginal loser in the YG (july gold contract).

The USD/JPY is a smallish position so although it's moved pretty decisively against me, I haven't been in as big a rush as I should be to take it off.

The YG (gold position) is two buys, actually. The first one was a terrible fill...I couldn't buy the June as May was ending and went to the next higher contract in the overnight hours...I ended up (stupidly) hitting the ask -- almost more as an oversight and stupidity than anything else, on what was a MASSIVE spread. Later, I picked up another contract at a more reasonable price, but it's looking doubtful if that position will give me a profit before I close it out. It was mildly positive yesterday, but in the early morning US time trading hours, gold took a massive hit and had rebounded slightly by the time I logged in and looked it over.

The current cycle analysis is calling the drop gold overnight as a daily, but we also have a 20 day nominal low trying to be set against that price point now (coming in a good 4 days early). So, if that low is not in Friday could bring some more fireworks to the downside.

All in all, i need the weekend to update my analysis and try to get familiar with the nested HIGHs analysis some of the cycle guys are suggesting is more appropriate for gold.

GC YG Gold Contract

2011-06-01T23:51:00.000-07:00

My preliminary hourly analysis shows that we are nesting into an *expected* (nominal) 20 day low within the next couple of hours....a much shortened 15.8 days.

Of course, I have yet to do the flip analysis where I show the peaks at highs from reinforcing cycles, but that SHOULD (?) present a possible trading opp coming out of that low later tonight.

For me, I'm holding my existing long -- nervously. :)

YG Jul price $1540 ish.

USD/JPY at a crossroads (maybe)

2011-06-01T19:27:00.001-07:00

I may have taken a big 'swing and miss' on this one, but with limited funds (thankfully).

I took a BULLISH position at 81.735, near a cycle high on a gap breakout. At the time, the cyclical analysis showed this as being in a position for a bullish move in relation to the 20 day cycle as well. Unfortunately, almost as soon as I took the position we were looking at a classic 'gap and crap'.

Instead of being mature and waiting until I had completed a daily down to a minute by minute cycle, I jumped in with a smaller position. In fact the price was buried between two competing trend lines...One bullish, and one bearish, which were getting ready to cross.

The price spiked as low as 80.65, at which point any responsible trader would have been stopped out--I'm still working on a better stop discipline -- but this happened when I wasn't watching the security closely.

The pair is now back up to 81.17 -- still deep in the red, but not as bad.

Of course, given this new data the previous cyclical analysis which was pointing to a bullish cycle trend in the 20 day cycle got completely blown up. I'll complete a more thorough analysis of the USD/JPY this weekend hopefully, but I'm wondering whether I really want to even trade this security...

Gold in Them Thar Hills

2011-06-01T19:19:00.000-07:00

The Gold Futures contracts are looking a wee-bit spiky.

Cyclical theorist postulate that concentric cycles coalesce to create spikes at reinforced 'nests of lows' for most securities.

However, upon some further reading, I've found that they speculate that COMMODITIES are different. That instead of spiking lows and rounded tops (like other securities) that they would form spiked TOPS and more rounded bottoms.

The speculation is that the shorter and longer cycle period line up on the PEAKS rather than the cycle LOWS and work as such.

If this is true, and there are cyclical influences in the commodities (and in particular gold) market that would mean that we would see spike highs...

Interestingly, spiky highs are the hallmark of a 'parabolic blowoff' usually (in other securities) and mark local (at least) if not long term topping patterns in a security -- which might explain the number of incorrect "the top is in" in gold, oil, corn, wheat, silver -- well, you name it, but primarily the metals markets.

With this revelation in hand...I'm going to need to redo my analysis of Gold. Some cycle traders think we are nearing a top....I see it as not in place yet....So, I'm going to attempt a reanalysis with the cycle peaks reinforcing.

Stance: Mildly Bullish since this weekend at 1532, currently trading i vicinity of 1540.

EUR/USD hits target of 1.44

2011-05-31T15:11:00.001-07:00

The EUR/USD did indeed hit the Monday trading target of 1.44. It's churned sideways since then, but is still currently trading just over 1.44.

I'll have more analysis of the EUR/USD, but for the short term, I'd like to look at a couple of other securities...

GC (the gold futures contract -- or YG for the emini), and
USD/JPY forex pair.

Obviously, both of these securities are in places where one would *think* that fundamentals drive their price action, but I'm going to approach these two from strictly a technical, cycle driven perspective. Look for each of these in my next two posts.

EUR USD and the 20 day cycle

2011-05-28T17:36:00.000-07:00

This is going to be my first attempt at chronicling what I believe is transpiring in the Eur/Usd forex pair.

This pair is a toughie because their is SO MUCH news-flow surrounding these two currencies that it really is an exercise to try to ignore the 'noise' and news events. That is (partially) why I'm looking at the 20 day cycle and not possibly something shorter in length. In fact, it may prove impossible for my analysis at this cycle length to have any predictive quality or any better than dart throwing -- we shall see.

I'm also choosing the 20 day cycle because I'm able to do a weekend analysis and talk about what portion of the cycle we're in and (hopefully) what that should mean to price flow.

I'll start with the daily chart on the EUR/USD.

54 month cycle -- the last cycle low was in the second quarter of 2010. the next cycle low is expected in 2015. this cycle has not peaked yet and is a bullish influence on the pair.

18 month cycle -- the last cycle low was perhaps coincident with the 54 month low in the second quarter of 2010. the next cycle low is expected around the end of 2011. this should have a potentially bearish influence

40 week cycle -- this cycle has been running short. so this cycle could have peaked or be in the process of peaking, however, anything over 1.35 keeps the valid trend line (bullish) intact.

20 week cycle -- this cycle just bottomed or is in the process of bottoming. this cycle bottoming is the most supportive of the bullish case while trying to trade the 20 week cycle. while the 18 mo. cycle is slightly bearish, if anything the longer analyzed cycles seem to be supportive of upward pressure on prices. and, if the 20 week has bottomed, should supply bullish pressure for the next month and a half at least.

10 week cycle -- this IS or JUST DID bottom coincident with the 20 week although our historical analysis shows these two cycles slightly out of phase. the cycle bottoming last week would support the bull case for this pair in the upcoming week.

5 week cycle/40 day cycle -- historical analysis shows this running around 36.2 days.

20 day cycle -- this is showing up with a valid (bearish) trendline that Friday afternoon's action has the price bar bumping up against it. On a more bearish note, by Monday, the 20 day cycle will be clearly past peak and pushing downward on the pair.a

10 day cycle -- the 30th, Monday, should be the peak of the 10 day cycle, and later in the week,

5 day cycle -- the 5 day cycle should be pointing downwards by Wednesday as well.

Next, I'll look at the 15 minute chart. And this is where I have some problems that need some resolution

Unfortunately, my 15 minute chart seems out of phase with my daily analysis.

For example, the 15 minute chart is showing May 23rd as a nominal 20 week cycle low. This would be very bullish as virtually every cycle down to the 5 day nominal (which just hit a cycle low on Friday would be pushing a bullish influence on the chart -- a price of 1.44 at some point before the end of Monday's trading would be expected (we're at 1.4282 right now).

It's completely unclear whether this cycle analysis on the 15 minute chart is accurate, so I'm going to check with some other cycle traders and see what they are seeing here.

Study of Cycles

2008-08-21T22:16:00.000-07:00

I've been meaning to begin this blog to focus on the pursuit and retention of money for sometime.

While my original conceived purpose of this blog was quite broad, the impetus for actually starting it is going to be to document and catalogue my discovery and study of cyclicality in the marketplace.

Over time, surely, more diverse topics will leak their way into this blog, but for now, i intend to use this as a place to record my thoughts as a "newb" in technical analysis as it relates to and uses cyclicality to predict future price moves in financial markets.

While many people have suggested and proposed different methods for divining future price moves from past performance of securities, I intend to focus most of my studies on the work of cycles as first written about (to my knowledge) by JM Hurst.

JM Hurst penned the book The Profit Magic of Stock Transaction Timing.

While many concepts were discussed in Hurst's book, perhaps the most compelling was the idea of using offset moving averages to predict cyclical movements in stocks. (much more on this in later posts).

A Word About Cycles

To the naked eye consistent cyclicality is not evident when looking at a price/time chart of a stock or index. In fact, the movement of stocks has been likened to that of "random" or "brownian" motion of molecules in free space. In fact, this notion has become so entrenched as to spawn a popular book entitled, "A Random Walk on WallStreet" (which i've admittedly never read) and the popular concept of modelling financial behaviour around a normally distributed bell curve.

(While the notion of modeling financial securities behaviour around a normally distributed bell curve is worthy of it's own blog, "The Black Swan" is an excellent book that goes a long ways towards discrediting that notion -- for reasons completely separate from anything that we'll be talking about in our study of cycles.)

In fact, Hurst does not try to explain the reason for the cyclical nature of the financial markets, but only goes so far as to try to recognize and catelogue them.

Why Aren't the Cycles More Obvious?

The reason the cycles aren't more obvious when viewed by the naked eye according to Hurst is multi-fold.

First, there IS a bit of "randomness" in that the cycles, though recognized to *generally* fit a pattern, are acknowledged to show some variability around a "nominal" length of time. In addition, the strength of the given cycles can vary from cycle to cycle.

And lastly, and perhaps most significant, is that the cycles all interact "on top of" each other simultaneously. And therefore, it becomes difficult -- and almost impossible at times -- to discern one cycle from the next unless you understand and are cateloging ALL of the "known" cycles forces which are simultaneously exerting influence on a given security.

So What are These Cycles?

While the cycle lengths should be thought of as "nominal" (meaning, not precise) at times their presence can be seen with disturbing regularity.

Hurst, and his later disciples have roughly recognized the following nominal cycles (starting from the shortest and movin to the longest.

2 hr
4 hr
.87 day
3 - 3.5 day
7 day
14 day
5 week (25 day)
10 week
20 week
40 week
80 week
4 - 4.5 years
9 years
18 years

Confusing Time Scales

Now, here is where my first confusion came in. Hurst and his disciples are fond of using different time scales to express different cycles. In other words, hours, days, weeks, years are used....and sometimes months.

The confusion reigns because the time scales are thought of as "market time" In other words, a week would be the equivalent of 5 days (not 7).

It gets further confusing talking about hours....especially as they relate to different markets. While the stock market in NYC opens at 9:30 and closes at 4, how does one include (or not) after hours activity? And, in the futures markets they stay open all day except for a brief period of time (15 or 30 minutes) referred to as the "lockup" where trades for the day are settled.

I intend to do some research on these topics and report back a more thorough framework for understanding these different time scales in a later post.

ciao for now,
UG