One of the many tools at our disposal at 360 Investment Research is the use of cycles. What are cycles? Cycles are recurring events that happen at such a frequency as to be reliable in identifying the same event in the future. Think of the seasons of the year: Spring, Summer, Fall, Winter. These are cycles. They happen over and over again with reliability. We know with certainty approximately when these events will take place. Believe it or not, and I don’t have an explanation for it (other than ebb and flow of liquidity)… but markets also have cycles. One such cycle, the 360 trading day cycle, was introduced to me by Raj Ian Thijm on his site, http://timeandcycles.blogspot.com/. This cycle marks, with approximate reliability, turns in the S&P 500 every 360 trading days (which is also the equivalent of 525 calendar days or 75 weeks). See the chart below (you can click it to embiggen). The gray lines mark a distance of 360 trading days. Note how consistently this cycle marks significant turns in the market. What I also found interesting about this cycle is the possible significance of a cycle within a cycle. Look at the chart. See the green lines? This is the 360 trading day cycle on its 5th instance. Five 360 trading day cycles equal 1,800 trading days. Nice round number. But, that’s not the point. The point is that this 1,800 trading day cycle (a parent of the 360 trading day cycle) marked the relative tops of the S&P 500 back in 2000 and 2007. This same cycle has come due recently. Will it mark the top of the S&P 500 again? I don’t know, but I will be watching this carefully. The significance of the 360 trading day cycle is evident. Stay curious, investor.
With Small Caps and Mid Caps looking increasingly weak, not to mention stock markets across the globe (FTSE, DAX, CAC), we’re keeping a close eye on the S&P 500’s price action. If this major US index does not hold/bounce from this level, the next area of support would be around 1900, a confluence of previous resistance (now turned support) and a parallel trend line running from the November 2012 low. Monitor this situation closely, curious investor. Price tells us everything.