Cycle Commonality

Our last post pointed out several reasons for a technical analyst to be bullish. The NYSE A/D line has not broken its long up trend. The railroads such as CNR and UNP are both above rising 10 & 30 Week MAs and close to 52-week highs (CP now at a new 52-wk high) and now the broader stock indices brushing off Apples earnings disappointment along with ignoring torpedoes like Faceplant – sorry I mean Facebook and ZYNGA. Also our TSX the materials and the gold sectors have completed a perfect Fibonacci 61.8 percent corrective retracement the great 2009 to 2011 advance.

Cycle studies also have a bullish component. Our chart is the intermediate cycle overly of five diverse major stock sectors, the S&P500, The iShares Europe350, the iShares Latin America 40 and the iShares MSCI Emerging Markets ETFs. There are five cycle principles, Summation, Commonality, Variation, Nominality and Proportionality but in this example let us deal with cyclic Commonality and cyclic Variation. Cyclic Commonality occurs when the peaks and troughs of cyclic fluctuations of different markets are time synchronized and cyclic Variation occurs when the cycle magnitude and duration will shift due to fundamental differences in different markets

The strategy is to observe when periods of commonality or variation are present and to plan for the effect on the broader stock indices. Cyclic peaks tend to identify important peaks and cyclic troughs tend to identify important bottoms and cyclic Variation tends to introduce trendless markets. Enjoy!

Riverbed Island Reversal

Currently there are many technical reasons to be bullish. The NYSE A/D line has not broken its long up trend.  The railroads such as CNR and UNP are both above rising 10 & 30 Week MAs and close to 52-week highs. The broader stock indices brushed off Apples earnings disappointment and on our TSX the materials and the gold sectors have complete a perfect Fibonacci 61.8 percent corrective retracement the great 2009 to 2011 advance.

Also of important note is the bullish trend reversal of Riverbed Technology, Inc. (RVBD) after reassuring investors with better-than-expected earnings reports and future guidance. The technical picture has changed suddenly with the completion of an island reversal formation as displayed in our daily chart. Bullish island reversal patterns are rare but very reliable. Next few posts we look at the rails, the materials and the NYSE A/D line

TSX Elliott Wave Count

If you're ever lost and on a deserted road without a cell phone, grab paper and pen and begin an Elliott Wave count. Within seconds, a stranger will appear to correct your wave count. Ask this guy for a ride.

The problem has always been where to begin the wave count.

Students of Elliott Wave will easily recognize the three advances (impulse waves) that are interrupted by two corrections (waves) to be a perfect five-wave Elliott bull market. The completed bull is then followed by a three wave A-B-C bear phase.. Keep in mind cycle analysts have observed that, for the most part, bull markets tend to persist for about 36 to 42 months and will contain three separate and distinct advances or “up legs” which ties into the three impulse Elliott Wave theory.

Our chart spanning about 200 weeks of the S&P/TSX composite index appears to display a complete Elliott Wave bull and bear phase if we begin the wave count from the lows of March 2009. The first advance or wave (1) ran from the March 2009 low to the peak of mid-June. The first short corrective wave bottomed at (2) in July 2009. The second advance or wave (3) ran from the mid July 2009 low (2) to the April 2010 peak at (3). The second corrective wave (4) was longer the corrective wave (2) and bottomed in July 2010. The final advance or wave (5) ran from the July 2010 low at (4) to the final peak in April 2011 at (5).

The bear phase is usually an A-B-C correction with time duration shorter than the bull phase. The first, or A, down wave is a corrective wave that “comes out of nowhere” and is initially thought to be a buying opportunity. In the example of the TSX composite, the A down wave began from a price peak in early March 2011 and ended in early October 2011 for a loss of about 3,400 points or a 50% retracement of the 2009 – 2011 bull phase.

The subsequent rebound wave B ran from the lows of October 2011 and peaked in March 2012 retracing about 50 per cent of the losses sustained in wave A. During the recovery wave B, many investors are still bullish because they still regard the A down wave low to be a buying opportunity.

The final C down wave can take many forms. It can be a sudden and sharp decline accompanied by fear, confusion and panic, which is typical of a C wave bottom or it could be shallow and not violate the lows of the A wave. In any event investor temperament will change from bullish to bearish and may cause investors to stampede out of risky assets such as cyclical stocks and into safe assets such as utilities and telecoms. If this is a C wave bottom, then we start into a new Elliott 1-2-3-4-5 wave advance that should run through 2013. 

The VectorVest Challenge

Anyone who follows BNN will eventually get some free advice from the dynamic duo of Cole and John Stevens who claim that when VectorVest suggests to “sell” or advocate to not buy stocks at this time – “you should listen.” VectorVest of course sells a software package that claims in its commercials, “better results than any TV expert or advisor.”

A few years ago I attended a VectorVest user meeting in Buffalo N.Y. There were about 20 attendees – all of whom were experienced investors. I found that one half of the users were satisfied with their investing or trading results and the other one half were not satisfied.   

Some VectorVest user comments are found on: http://www.squidoo.com/vectorvest-reviews

A partial clip of the comments – with some out of context typos not corrected

Ed Nov 24, 2010

Vector vest is a mixed result trading programam. There several methods that will make stock recommendations. Some are good and some very risky with no specific time frame to hold the stock. I've tried it and gave up because there were way too many methods or approches in which to receive the results. My results were mixed but overall I lost more than I made.

seller Atlanta Nov 23, 2011

I have subscribed to Vectorvest for around 3 years and I would not call it a scam although I have not had good results from the market timing system. Whenever they do their back test demonstration to show you what great results they get they pick a recent bottom and start it from that day. I have never ever gotten the results they say you can get with their strategies. In fact I would say I have been more prone to lose money than win.

jack barnes May 16, 2012 @ 6:47 pm | delete

I Have subscribed to vectorvest for two years and have had mixed results .Jack Barnes

Hedge Apr 11, 2012 @ 11:37 am | delete

VECTOR VEST IS A COMPLETE WASTE OF MONEY....YOU DONOT NEED IT...AND IT IS CONFUSING....JUST ANOTHER BS PROGRAM...

OK let us resolve the key VectorVest question – does it work as claimed?

Well we know for sure the dynamic duo of Cole and John Stevens know – so here is a challenge to Cole and John Stevens, let us see your summary of trades. After all when you go on national television and claim something works – prove it!

Send the summary to me at info@gettingtechnical.com or direst us to your social media site. So just to be sure – we need the summary of trades from your institutional trading platform – not some spreadsheet you created - block the account # that’s OK – we wait with great anticipation.