7 replies to this topic

[arbman]

I am taking a break from here until January...

This is the most bullish outlook I could come up with. However, the market breadth has strengthened over the past two weeks and the market appears to be marching higher, albeit on low volume and elevated speculation. My comps show that these rallies usually ended fairly abruptly when the volume returned to the markets and sharply sold. I still expect January and March period to be a transition, if we will be indeed seeing a higher interest rate environment for a while and I do not see in our data that the market is ready to handle the higher interest rates.

On the other hand, this rally satisfies the cycle targets around 1125-1135 on SPX basis from the previous 84-88 day cycle low generated around early November. I think the participants will try to push the market to the highest levels at the end of the year at this juncture, however I generally see this as an Holiday anomaly on low volume and I still think we will have a sharp sell off soon...

One last supporting clue came from the sector leadership in December --I found this chart on masterdatareports.com in a link posted earlier by Islander. It appears the energy led the mini-rallies for the whole time in general.

So, it looks like we already had the ramp up with the energy and this cycle will not see the same commodity overheating like in the previous cycle tops. In my observation since 2005 that these tops generally alternated in between the speculative blow offs in the tech assets that has already gone through significant distribution since October --check out AAPL for example, and the energy and commodities.

This time there may not be much money left to go into the energy and commodities from here since they already topped earlier and has shown significant relative strength during this December trading range...

The distribution in every other sector is quite visible while the rotation into energy keeps the SPX stable --if you would like to call it so, finally the utilities also broke down as the expectation into a lower interest rate environment got destroyed with the bonds that got trashed. I think this is temporary though. It appears we may still have a mini-blow off in the energy and a little further push left for next week on this chart...

Finally for the bullish case, this was my comp that I posted here earlier, so there is still a chance for a last blast higher in January, if we do not see much downside. As I said, I consider this low volume ramp up very iffy this projection below very mechanical at this juncture, but a rally of some sort is still a possibility from a low in early January since it is the 8 wk cycle low. Indeed, this projection depicted the painful December trading range in advance;

The volatility has been much less than this chart implied, except for the Dubai sell off in futures...

Best of luck and happy new year...

Edited by arbman, 25 December 2009 - 05:08 PM.

[thespookyone]

Great work, Arb-thx for sharing!

[NAV]

arbman, Appreciate your work and thanks for sharing it. I am not arguing here, but trying to present my viewpoint. I do not think the rise here is an anamoly, rather a charateristic of the uptrending market, where cycle lows can come as higher lows. My own simple cycles observation calls for a 20 week top during end of January, followed by a drop into the 9 month bottom in March. Anyway cycles are not my primary tool. It's just something that fascinates me.

Edited by NAV, 25 December 2009 - 10:54 PM.

[arbman]

NAV, the cycles that I am following are here, [ref: 1] I update this time to time, but they don't change on a daily basis obviously.

The nominal 64 wk cycle shows that the majority of the stocks bottomed in October-November of 2008 and 16-17 weeks later we had the March low. Actually, this happened because the downward action was so strong that we had another price low in March much later than the breadth bottom. This smaller 16-17 weeks harmonics remained, we also had the July and November lows. The smaller harmonics are also visible in the link above.

So, the larger 64 wk cycle should dominate the action from here in my work and we are in the last 6-7 wks of this action, the projected lows should be around early February. The cycle really resonates nicely right now with its smaller harmonics (multiples of 2) and we should have a sharp dive into this cycle low.

If you take the 64 wks x 7 = ~448 days... We should be showing similar characteristics to the following dates at the moment...

Today - 448 calendar days = Oct 3, 2008 -- down trend, the week of major crash with declining 200 dma
Today - 896 calendar days = Jul 13, 2007 -- up trend, one week ahead of another major top with rising 200 dma
Today - 1344 calendar days = Apr 21, 2006 -- up trend, two weeks ahead of May 2006 decline with rising 200 dma

I think the actual cycle low is 444-446 days actually and then it lines up perfectly with all of the other tops in 2007 and 2006. If so, Friday's high should not be really exceeded next week, I actually voted down in the weekly poll.

In my observation, the major cycles do not change very quickly, so I think the current leadership and distribution patterns and the low volume ramp up still weight the probabilities toward a failure of this current rally very soon from here. We'll see...

[cycletimer]

My cycles are: Jan 4th= TOP... sell off into mid-February (Valentine's Day low)... rally into March, then the real selling starts....

[arbman]

This is the exact picture I have, my bottom date is Feb 12th, but it will adjust as we get closer...

[arbman]

Sorry for the typo: I meant Feb 22, not 12. But probably a fair range should be around Feb 12-22, so yours could be very well the date...

[arbman]

I am calling off some stuff I posted above and correcting... Nothing major, but in fact reinforcing my longer term cyclical observations at this juncture... Let me explain;

So far we have a pretty clear cyclical formation... Mainly 64 weeks as the major structural theme. Simple arithmetics here says that within 64 weeks there were 2 x 32 week cycle harmonics (July low) and 4 x 16 week harmonics (March, July and Nov lows) and 8 x 8 weeks cycles in between. These are all visible on the above referenced spectrum readings. Although all of my cycle periods appear a little longer at this juncture about 1-2 days.

When I ran a simple calendar count including the US holidays for the weekly picture, the last price low on Dec 18th came up as actually the last 8 week cycle low ahead of the 64 week cycle completion --it is about 390-392 calendar days from Nov 21, 2008. This deviation is mainly caused by the holidays that were not part of the daily counts in my smaller cycle periods on the charts. I was looking for the 8 wk cycle low at the end of the month in 1-2 days, but I think it has already happened at this point last week.

Momentum and breadth trusts confirm this so far, this impulse does not look like a rally ready to decline to an 8wk low, but rather slowly taper this week and then most likely sell off. The points gained is also consistent with the 8 wk cycles so far, typically around 30-40 points. So, this should be the last major impulse from the 8 week cycle low to the upside, IF the 64 week cyclical structure is still holding. I have nothing suggesting otherwise so far as we had almost all other cycles working like a clockwork. Along the way, some cycles showed slight variations, up to 3-4 trading days. This is normal. I also expect such a variation at the next major 64 week cycle low too due around Feb 9-15th (narrowed down a bit further)...

From my perspective, this rally is pretty much done, maybe 4-5 points further... I will have to seriously revise my thinking if this rally extends, say over 1135. I am thinking we will gap up on Monday, to say 1128, and then most likely sell a bit and then try to test back up by the end of the week to 1116-1120 zone or so and then sharply decline in the new year. The slope of the cumulative volume shows that we had the slowest ramp ups so far since the Nov low which is a more important reference point in my analysis...

We should correct in the next 7 weeks after the new year...

Best of luck.

Edited by arbman, 27 December 2009 - 04:19 AM.