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FOCUS ON CYCLES

The order of the Universe shows in the thousands of cycles observable in nature and many documented by the Foundation for the Study of Cycles. It shows in the minute structures of molecules, atoms, and subatomic particles. It also shows in the ordered structure of the solar system and, as scientists are now discovering, in the inter-relationships of galaxies. The smallest particles to the largest clusters of galaxies follow patterns of recognizable order... so why not the markets?

Prices move in a manner that may initially appear to be random movement, but with study show an underlying order. Cycles, waves, Gann squares, angles, Fibonnacci relationships in both time and price, and other observable phenomena are reflections of this underlying order. Unfortunately, we do not know its causes, nor do we have a solid grasp of the rules. But anyone who studies the markets with an open mind will see there is indeed an order to all markets, especially in the formation of highs and lows, which are the focal points or high energy levels of a market.

Market cycles are not oscilloscope exact; they contract, extend and sometimes skip a beat. But cycle tops and bottoms can be identified and traded in most markets, often with 70%+ accuracy. Fortunately for us, the energy of the markets is visible in price movement, which show repeating patterns. Market oscillators reflect this energy as overbought and oversold levels. More often than not, these overbought and oversold levels are also cycle highs and lows. By identifying the lengths of the most powerful and consistent cycles, called dominant cycles, we can often anticipate tops and bottoms as well as the direction of the trend, or longer cycle.

Knowing that cycles affect market prices is of little more than a passing interest for a market analyst and trader unless the cycles can be used to identify tops and bottoms, and to give indications of future price activity in both time and price. Herein lies the challenge presented to the cycle analyst.

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