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Cycle Analysis... a way of looking at price action.


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Cycle Analysis... a way of looking at price action.

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  #1 (permalink)
 glennts 
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The posts in this thread have been temporarily moved here from the long running Spoo analysis thread as it became clear that a thread dedicated specifically to this topic would be a more appropriate place.

In a few weeks a more comprehensive thread will be started in the Elite section of the forum covering the underlying theory, analysis methods and the everyday practical application of Cycle Analysis.

This approach has served me well over the years of trading equities and futures and perhaps you will find some insights that will be helpful.

-----------------------

From earlier: >>If the MW Low is in place then price will seek higher time frame resistance which will certainly result in a test of 4100.<<>> At some point this Multi-Day Cycle is going to roll over and likely test down to @ 3980 +/- and if that level holds and a Higher Multi-Day Low is put in place then a larger move to the upside becomes a greater possibility.<<



The overnight high was 4094.75 and as this chart shows, price is testing the area of resistance that has rejected price lower over the past several weeks. On this 360 Min chart the Green dotted line is a 60 period sma ( 15 days, the historical average of the Multi-Week rotation). This is the area I expect the Multi-Day Cycle to roll over and test lower looking for support or spend time flagging out to the side in consolidation. No clues yet about the likely hood of breaking the back of this downtrend and those answers will come out of the when and where of the next Multi-Day Low.

The stochastic at the bottom has spent more time being overbought than in the prior swing high and appears to me that it wants to roll over. I suspect we have already seen the high of this day and will be pushing lower. A break of the White ma on this chart will indicate the MD Cycle is correcting. Despite the push higher towards the end of yesterday's trading, Cumulative Delta remains negative.... more volume on the bid than on the ask suggesting distribution.

Outlined is the area where the next Multi-Day Low is likely to be found. Break below this area then the odds start to shift in favor of the Bears.

Because it is interesting the clusters formed by the POCs of the prior 6 Hr bars has been highlighted. Notice the relatively even spacing of the groups.

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 glennts 
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From 05:18 CMT: >> I suspect we have already seen the high of this day and will be pushing lower. A break of the White ma on this chart will indicate the MD Cycle is correcting. <<<<Outlined is the area where the next Multi-Day Low is likely to be found.<<



From this point forward until the next 24 Hr Cycle Low is found a 6 Hr SMA and the Middle of a 6 Hr Donchian Channel will provide a reasonable area for any counter trend rally to fail.

Until the next Multi-Day Cycle Low which price is currently seeking, a 24 Hr SMA and the Middle of a 24 Hr Donchian Channel will serve as hard resistance to any break above 6 Hr resistance.



When you have changes in behavior like a bar closing above or below its Pivot ( blue or red hash marks ) that tend to occur at reasonably consistent intervals and against demonstrable area of support / resistance then you gain predictability and you lose randomness.

If you find this kind of analysis helpful and would like this degree of detail discussion to continue please hit the Thanks button.

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 glennts 
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Earlier: >> Outlined is the area where the next Multi-Day Low is likely to be found. Break below this area then the odds start to shift in favor of the Bears.<<



The Multi-Day Cycle is typically 5 days.... today is the 4th day. I suspect this 24 Hr Cycle Low may have been put in at the Close or will be put in early in the overnight session. Where the next 24 Hr Cycle High is made will determine if these lows will hold. Price is currently 50 +/- points above the earlier 5/12 low with a Cumulative Delta that is twice as negative as that of the prior low. Draw you own conclusions.



Some days are better than others but any day you can trade well is a good day.

I was able to build a three contract position starting with the 07:30 rejection from the underside of the 24Hr Donchian Middle ( white dash ) which is behavior consistent with the break of the Multi-Day Cycle discussed earlier. The two addons were tests of 60 Min Donchian Middle... the same principle on a different time frame. That trade was exited when price hit the bottom of the "likely low" range outlined in the earlier chart posted yesterday. The bottom of that range was defined loosely by the blue dashed Middle of the 5 Day Donchian Channel. That level broke at 10:55 and was tested for resistance at 12:00 which got me into my second trade with a addon at 12:40.

Net on the day of 304.75 ES points.

I spend June thru October at my property in Colorado and will be heading up there shortly so for the foreseeable future my posting here will be put on hold. This AM readers were asked to vote Thanks if they found this type of analysis helpful and out of the 128 visitors counted, three said yes.... that's 2%.

So there is that to consider.

Good luck.

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 glennts 
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To get to 4200 would require eating thru a large amount of supply and to get to @josh 's 4400+ would require a change in the direction of the Multi-Week Trend. Can this happen? Of course it can. Will it happen anytime soon? Show me a Multi-Day bottoming pattern and a break of Multi-Day resistance followed by a break of Multi-Week resistance and I'll show you a maybe it will.

In the Weekly chart below the Support / Resistance Band represents the trend of a 16 Week period which is referred to as the Multi-Month Cycle. The Green ma represents the trend of a 4 Week period which is referred to as the Multi-Week Cycle. The Multi-Month Cycle can be see as the breaking of the Support / Resistance of the Multi-Week period. The comments on the chart highlight this process. Notice the regular duration of 12 Weeks in the last three swings.



Just as there is interaction between the Multi-Week and Multi-Month areas of support and Resistance as shown above, the below chart shows the interaction between the Multi-Day and Multi-Week areas of Support and Resistance. This Dominant / Minor Cycle relationship can be found across all time frames including all the way down the 90 sec and the 5 Min time frames. If you can accept the fractal nature of price movement as seen over different time frames, does it not stand to reason that analysis methods that work well in one should also work well in the other time frames.


"If you don't want random outcomes, don't make random decisions."
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 glennts 
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This Dominant / Minor Cycle relationship can be found across all time frames including all the way down the 90 sec and the 5 Min time frames.

To follow up on this, the charts in this quote's post showed the Support / Resistance relationship between Multi-Month and Multi-Week time frames and Multi-Week and Multi-Day time frames.

The basic concept is that a larger time frame price rotation can be seen as constructed of a series of smaller time frame rotations. For example: In the Weekly chart above you can see the last three swings as having a H - H and L - L duration of twelve weeks. As price moves between the Low and the High of each swing, there will be Minor rotations inside this larger move as price rotates from the Low to the High of each of the weeks that construct the twelve week cycle. The price movement of this larger cycle is said to have a dominant relationship to the smaller, minor rotation of the weekly cycle. As price moves from low to a high, the weekly bars will be putting in higher lows and higher highs and when the high of this twelve week cycle is found and price then seeks the next cycle low, this pushing lower will change the behavior of the weekly bar causing it to close lower and as can be seen on the chart, put in lower lows and a lower highs. This higher time frame cycle is determining the trend of the lower time frame cycle.... Dominant / Minor Cycle relationship

The advantage of viewing price movement from this perspective is derived from the degree to which the Dominant Cycle rotations are consistent in their durations. If you know when the larger is likely to turn then you can be prepared for the change of trend of the smaller.

In the charts above the Multi-Month time frame has a dominant/minor cycle relationship to the lower Multi-Week time frame. The Multi-Week time frame itself has a dominant/minor cycle relationship to the lower Multi-Day time frame.

The chart below is an attempt to demonstrate the dominant/minor cycle relationship that exists between the higher time frame Multi-Day ( 5 days ) Cycle and the lower time frame Globex 24 Hr Cycle. Because the dominant cycle affects the behavior of the minor cycle, the White 4 period ma shows how the trend of the 24 Hr period changes as the Multi-Day Cycle rotates between its Lows and High. Understanding this cause and effect relationship can help you answer what is the most important question most of us have as intraday traders: Do I go long or go short?


"If you don't want random outcomes, don't make random decisions."
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 glennts 
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Posting this ES / 6E comparison as the 6E is currently providing a clearer example of the Dominant / Minor Cycle relationships discussed in the earlier post.

On the lower left of each chart both the ES and 6E put in a Multi-Week swing lows and out of these low both broke above Multi-Day resistance that is represented by the middle area of the band. As is "normal" behavior out of a MW Low, the 6E found support where expected in the area of the 5 Day Donchian Channel Middle ( Blue Dash), the 5 Day SMA ( Blue Dots) and the Middle of the Multi-Day S/R band which at that point was turning higher. Contrast this with the ES that had a sudden drop out of that first swing high to then put in on the daily chart, a Multi-Day Double Bottom. This drop was on Wednesday the 18th which may have been FOMC news related but which obviously had no effect on the Euro. Never the less, it is not un-common to see sudden, out of left field moves in the Index Futures intended to wipe out in this instance the Longs before a higher time frame move higher kicks in. Notice the final drop of 50 points and the reversal higher which clearly cleaned off the table in a move I have come to think of as a Stop Cleaner. When this type of market manipulation occurs it would not unwise to consider it a confirmation that a push in the opposite direction is about to happen.

The Blue Middle of the S/R Band represents the trend of the Multi-Day Cycle and that trend is determined by the Multi-Week rotation. On the upside of the MW Cycle you can expect the Multi-Day rotation to make higher highs and higher lows. This is more evident on the 6E than on the ES but the process is still the same.

"If you don't want random outcomes, don't make random decisions."
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 glennts 
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As for today. Price has tested and gotten a bounce off the initial area of Multi-Day support and has since that test flagged into a triangle, a correction in time as opposed to price. You can see that since the end of yesterday's session and in today's overnight trading price has hugged the underside of the Band Middle rather than being rejected lower. This is bullish behavior. The Stochastic which represents the rotation of the 24 Hr Cycle is wanting to turn higher and to do so price would need to break the obvious downtrend line and signal a Higher 24 Hr Low... an event which only occurs after a Multi-Day Cycle Low. If this breaks higher then the top of the 24Hr Donchian Channel at 4168.75 is a reasonable initial target followed by the upper edge of the band in the 4180 area.

Good luck, be careful.

"If you don't want random outcomes, don't make random decisions."
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 glennts 
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it is not un-common to see sudden, out of left field moves in the Index Futures intended to wipe out in this instance the Longs Shorts before a higher time frame move higher Lower kicks in. When this type of market manipulation occurs it would not unwise to consider it a confirmation that a push in the opposite direction is about to happen.

In the first 3 minutes after the NY Open price hit 3 points below the initial target and then noped out of the attempt to put in a Multi-Day Low.

It's a double edged sword.


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 glennts 
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So, learned something about posting. Although it is not a problem for me on this side of the earlier "As for Today." post to recognize a changing dynamic and adjust trading decisions accordingly, it is a concern when the possibility exists that some viewers might be pointed in a certain direction as a result of my comments and then as conditions rapidly change as they did after the Open, they are left hanging.

There is nothing I can do about this as this thread does not lend itself to near real-time commentary so it's probably best to refrain from posting this kind of immediate short term analysis.


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 glennts 
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Price has dropped into the area where the next Multi-Day Cycle Low can be found and interestingly the new June Monthly Pivot at 4081 is right there adding some support for a bounce.

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