Market Cycles: Timing In The Eye Of The Beholder
Cam Hui | Mar 12, 2014 12:51AM ET
My former Merrill Lynch colleague Walter Murphy tweeted the following yesterday:
Walter is a highly experienced technical analyst and his tenure at Mother Merrill dates back to the days of Bob Farrell. His specialty is cycle analysis and Elliott Wave Theory, which is a topic that I never understood well because of the sensitivity of EW analysis to initial conditions.
h2 20-week cycle validated?/h2With the caveat that the market is affected by many cycles and the effects of a cycle low or high may be overwhelmed by the effects of other cycles, I present below a five year chart of the SPX with a 21 week cycle (as per Walter's observation that the 20 week cycle lasts 21-22 weeks). The vertical lines are the 21-week "cycle lows"; the blue arrows represent "good" buying signals at each of those lows where there was little or no downside for the next 4-6 weeks; and the red arrows represent "bad" buying signals where the market went on to see significant downside for the next 4-6 weeks. As the chart shows, there are significantly more blue arrows representing "good" buying signals than red arrows indicating "bad" signals.
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