Charts don’t lie!
12.04.2021
Charts don’t Lie!
Charts don‘t lie, they present the situation: it is the reader who must decide.
Using a system of charts, there are 4 cycles one needs to be aware of:
1. Blue: this cycle is the shortest time frame that we look at and lasts roughly 120 days from the start to the end of a cycle
2. Red: this equates to a year and = 3 of the Blue cycles
3. Black: this lasts 4 years and each high or low will arrive approximately every quarter
4. Pink: this also last 4 years and arrives every 6 months or so. There is an additional higher degree cycle that might come into play that is not mapped here and we’ll give that the green cycle moniker and lasts for 19 years and has 16 turns within it.
The proviso to all this is that it all depends on whether I, as the observer, have analysed the turning points correctly to arrive at my comments below. Be that as it may, the gist will be broadly correct.
With that said, the first chart is FTSE 100 weekly of price movements. The next high (Black 13; top right-hand quadrant of the chart) is due to develop by early to mid-May; but that can happen anytime through to mid-July.
Chart 1: FTSE-weekly
Now here’s the thing.
When looking at the weekly chart, one can see that there looks to be 3 sequential highs in a row.
One of the main rules behind this chart interpretation approach is that there can only be 3 highs in a row before a higher cycle high (or low) arrives, unless the market is going through at an ‘inversion period’; which it is NOT, so I won’t bore you with that complexity.
It is possible for the higher cycle position to t have already happened where the Black 11 & 12 registered and a Pink high and low would have occurred there also. However, the size of that move (in time and price) doesn’t look to warrant the higher cycle dynamic. This situation leaves me with the possibility that the higher cycle is arriving (late) but ‘now’ – and if it is, then it should prove quite dramatic. So that means a Pink high should be arriving also.
The weekly oscillators are already beginning to flash ‘red’. I think it is unlikely to extend in time as far as July 2021, as this will be the third sequential “Black high”. Yet this peak is well below the prior higher cycle high from January 2020.
Seemingly, the last similar occasion was from the January 7th 2021 “high” of 6900 down to January 29th low of 6400 and these are shown on the chart as Black 11 & 12. So, a similar timed decline would be 2-3 weeks long. Or this turn could be the Pink and Black high which would extend the decline to last for maybe as long as 6-9 months.
Chart 2: FTSE 100 daily
When we look at the daily charts, the dynamics are building to a “red cycle high” coming in. That is because it now nearing the time where Blue 8 is due (April 12-14) and Red 2 is due (at the same date). This would be the second higher “Red high” in a row, so there’s a question about whether the market dips to somewhere between where it is now (namely, 6930) and the Feb 26th low (of 6485) It should then rise again, up to a final “Red high” to meet the “Black 13 high”.
Regardless, it looks as though we should see FTSE take a dip in the next week or so and that should last at least a couple of weeks.
Below in Chart 3 I have sketched out my thinking of what I think is the most likely forecast. But as mentioned above, there are numerous possibilities here.
Chart 3: FTSE prognosis
Summary:
In short, there are two likely development scenarios given what we know at this moment in time
(a) The belief is that: in the next few weeks, the FTSE 100 will decline about 500 points, to rebound 800, thereafter it may not go higher for 3-8 months duration, OR
(b) The alternative is that the FTSE reaches its nadir in the next few weeks and this pause in its ascent lasts through to October /November time
The Chartist’s bias would be towards scenario (a), for in that situation this rally would extend itself to its furthest limits in time (and therefore, most likely credulity) before another sense of reality checks in. The Equity Markets are wonderful perpetually dynamic systems – so any changes with inputs, will alter the dynamic.
Still let’s keep track and see if Bold Simon is broadly correct! If nothing else it provides material for you to decide.
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