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.
20-week cycle validated?
With 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.
In addition, Christopher Mistal of Stock Trader's Almanac showed that we are moving into a seasonally bullish period for a mid-term election year:
Disclosure: Cam Hui is a portfolio manager at Qwest Investment Fund Management Ltd. (“Qwest”). The opinions and any recommendations expressed in the blog are those of the author and do not reflect the opinions and recommendations of Qwest. Qwest reviews Mr. Hui’s blog to ensure it is connected with Mr. Hui’s obligation to deal fairly, honestly and in good faith with the blog’s readers.”
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