Very quick post today. The largest moves happen when cycles in multiple time frames coincide. Good example from Tuesday’s Emini trade is shown below.

Cycle Analysis – Cycles Lining Up in 3 Time Frames (Emini 233, 699 & 2097 tick)

Disappointing Consumer Confidence numbers lead to a very quick 10 point decline. Cycle analysis was indicating 3 cycle tops coinciding in the 233, 699 and 2097 tick charts. Maybe I should re-state my rule: "The largest moves happen when cycles in multiple time frames coincide with the release of economic data."

Monday’s narrow range of only 10 points made Emini trading tough. But I always find trading in the direction of the higher time frame cycle analysis helps.

Cycle Analysis in Higher Time Frame (Emini 2,097 tick)

The highest Emini day trading time frame I look at is the 2,097 tick bar chart. As you can see in the chart above, the Better Sine Wave support and resistance levels kept you trading in sympathy with the flow of the market.

Cycle Analysis and Multiple Time Frame Convergence

For taking entries, I’ll look for multiple time frames to line up. I particularly like it when the 699 tick bar chart cycle turns an then the 233 tick bar chart cycle turns after that (or simultaneously). If I’ve got some volume confirmation (high volume churn, volume momentum divergence, etc.) I’ll take the trade.

The chart above shows a triple cycle analysis convergence. In the highest time frame (2,097 tick) we had cycle support. In the mid time frame (699 tick) we also had cycle support. The move got underway when the Better Sine Wave signaled an "End of Trend" warning signal in the lowest time frame (233 tick).

This caught the low of the day nicely. They’re not always this perfect. But the bigger moves will come out of multiple cycles lining up.

Trend Line Congestion (Emini 81 min)

I’m looking for a larger range couple of days coming up. We’re in congestion in the 81 minute chart (white bar) – suggesting a larger range move is on the way.

Pull Back in Up Trend Approaching (Emini 81 min)

We’re also about to form a Pull Back in uptrend, using cycle analysis on the 81 minute chart. After this forms it suggests the market will continue to rally – but let’s wait and see. Good luck with your Emini trading.

Quick post today on cycle analysis and how to increase your odds of trading cyclical turning points.

Cycle Analysis: Cyclical Top (Emini 135 min)

Friday's post showed that we were approaching a cycle turning point on the 135 minute time frame (3 bars per trading day). The chart above shows the Hilbert Sine Wave had crossed with the red line below the blue line and so a cyclical top was approaching.

"Cycle moves in higher time frames equate to Trend moves in lower time frames" – a very important principle of trading using cycle analysis. Now if we drop down to the lower time frame we can see what was happening:

Cycle Analysis: End of Trend (Emini 15 min)

On the 15 minute chart we had an "End of Trend" warning signal, which indicated that the cycle top on the higher time frame was likely to be valid. You can also see that the beginning of this latest uptrend move was also marked by and "End of Trend" warning signal that also coincided with a late cyclical low turning point on the 135 minute chart.

The 15 minute chart is chosen because I use a factor of 3 when moving from the lower time frame to the intermediate time frame and then to the higher time frame. So 15 min x 3 = 45 min and 45 min x 3 = 135 min. I use the same ratio when day trading i.e. moving from 233 tick to 699 tick and to 2,097 tick time frames.

Good luck with your Emini trading.

In case you did not receive yesterday’s post on tick charts, you can check it out here: Tick Charts: 5 Great Reasons to Use Tick Charts.

Explosive moves in the FX markets. Thought I’d show some cycle analysis using the Better Sine Wave – which has nailed a couple of really significant turning points.

Cycle Analysis: US Dollar Index (weekly)

The US Dollar Index reached a cyclical turning point with "End of Trend" warning signal two weeks ago. Since then we’ve had a 7.5% decline in the value of the US Dollar.

Cycle Analysis: Euro (weekly)

The strongest currency to respond to the US Dollar weakness has been the Euro. This has appreciated 9.6% against the US Dollar. Again the "End of Trend" warning signal on the weekly chart caught the low nicely.

Cycle Analysis: Crude Oil (daily)

Commodity prices are responding to the decline in the US Dollar – rather than anticipating stronger economic growth. Crude Oil has made a rounded bottom.

Cycle Analysis: Copper (daily)

Similarly, Copper is also on the rise. The "End of Trend" warning signal has worked out well in both cases. I track Copper prices because it’s used in the manufacture of a broad range of goods and so can be a useful indicator of economic growth.

Cycle Analysis: 30 Year Treasury Bonds (weekly)

Lastly, the Bond market has bounced off a "Pull Back" signal on the weekly chart. Bond prices appear to be on their way towards a cyclical high and "End of Trend" warning signal over the next few weeks.

It’s going to be fascinating to see how investors – particularly the Chinese, Japanese and Gulf States – react to the US’s new Quantitative Easing policy.

Good luck with your Emini trading.

Cycle analysis on some inter-related markets today. I can’t help thinking that we’re coming close to an important inflection point – in a number of markets.

Cycle Analysis: Emini (daily)

The Emini daily chart is showing we’re close to a cyclical low support level being put in. Yes, we could easily break down through that but take a look at the next chart.

High Volume Churn (Emini daily)

We’ve had a spike up in Volume Churn – this is the ratio of volume traded to the bar’s range. If you like, it’s a measure of "Ease of Movement". When the volume is high but the range is low, we’re finding it difficult to make downward progress because new buyers (at a low) are entering the market.

Back in November 2008, a daily volume of 2.4 million contracts produced a downside range of 34.25 points. Today, the same volume traded only produced a downside range of 20.75 points.

The hypothesis is that last November no one was buying, today there were new buyers entering the market. And don’t forget we’re tantalizingly close to the magic 800 level.

Cycle Analysis: Crude Oil (daily)

When you look at Crude Oil we are very close to a cyclical low turning point and an "End of Trend" warning signal. If we’ve found a low in Crude Oil and it begins to reverse, it could signal an uptick in inflation.

Cycle Analysis: Bond Market (daily)

Higher inflation would make the Bond market less attractive. Money would flow out of Bonds and into Equities. Indeed some macro, big picture guys are suggesting that hyper-inflation would destroy the long term bull market in Bonds that’s been in place since 1981 – short bonds, the macro play of 2009.

The Bond market has run-away in the last 4 months – a flight to quality. But it looks suspiciously like a blow-off move. From a cycle perspective, we’ve just completed a Pull Back in trend and we’re moving back up to the old highs. But we’ll get an "End of Trend" warning signal at some point in the next week or two.

Cycle Analysis: US Dollar Index (daily)

And of course if we get higher inflation and the Bond market looks less attractive to overseas investors (Chinese and Saudis) then the dollar will decline – even tank? A weaker US Dollar would also fuel inflation from more expensive imports.

The global de-leveraging of 2008 has seen the Yen and US Dollar strengthen. But did the US Dollar peak in late November 2008? We certainly had an "End of Trend" warning signal and we’re now making a lower cyclical high. Will this resistance level hold?

Lastly, the credit markets are starting to improve. I was surprised by how much. Check out this article by Prieur du Plessis on The Big Picture.

And then next week we (or should I say "you" since I live in Australia, mate) get the Obama-most-expensive-ever-inauguration. Talk about convergence of turning points.

Good luck with your Emini trading.

TRIN Indicator System (Emini daily)

Overshoot of Pull Back (Emini 27 minute)

Cyclical Turning Point (Emini daily)

Good luck with your Emini trading.

A look back at 2008 in terms of cycle analysis.

Cycle Analysis 2008 (Emini weekly)

The weekly Emini chart above shows the major turning points:

• The Emini peaked with "End of Trend" signal in October 2007 – end of up trend.
• The next cyclical low was broken in January 2008 – start of down trend.
• The next cyclical high in May 2008 was a test of the January highs.
• The next cyclical low in July 2008 held for a while but was eventually broken in September 2008 – down trend continuation.

As you can see, trend moves develop out of cyclical turning points that do not hold.

Cycle Analysis 2009 (S&P500 Index monthly)

As for 2009, for me the most important chart is the monthly chart – where a cyclical low is approaching. These don’t come along too frequently and so their importance is heightened. A cyclical low will be confirmed when December’s high (918.75) is broken.

Good luck with your Emini trading in the New Year.

The Emini fell 12.75 points today on very light (pre-Xmas) volume. We’ll most likely drift over the next few trading days with no directional clues. However, I’m watching my daily chart where we have an approaching cyclical low on the Hilbert Sine Wave.

Cyclical Low Approaching (Emini daily)

Good luck with your Emini day trading.

The Emini jumped 22 points today on very high volume of 2.8 million contracts. It looks like a significant inflection point is approaching with crude oil topping out, the bond market rallying and the US dollar strengthening against the Yen, Euro and Pound – all bullish signs for US equities.

I’ve been watching this weekly Emini chart for a while now. It shows a long term cyclical low is approaching. However, we’re still in a down trend on the daily and 135 minute Emini charts. This down trend won’t be complete until we get a pullback and final push down with "End of Trend" signal. My best guess is the pullback is underway now.

Cyclical Low Approaching (Emini weekly)

The chart below is interesting and shows how the Better Sine Wave (my version of the Hilbert Sine Wave) caught the top of the Crude Oil market with an "End of Trend" signal. This was confirmed by low volume up bars, indicating lack of demand.

"End of Trend" Signal in Crude Oil (daily chart)

It’s so easy to follow multiple markets using charting platforms today. Sometimes it clouds decision making and for that reason I restrict my inter-market analysis of the Emini to just three:

• 30 year Bond market
• US Dollar versus Japanese Yen
• Crude oil

Good luck with your Emini trading.