Phasing divergence? Latest trading room video explores evidence

This latest video from David Hickson over at Sentient Trader looks at a possible divergence between US and European equity markets. I have been keeping one eye on an alternative analysis that places a 40 week low at the October trough in global indices ever since the excellent post by William Randall on the spectral commonality between the FTSE and S&P 500.

From my own point of view I do like the look of a 40 week trough in the FTSE and the DJIA. The DAX though, after making new highs this week favours an 18 month trough. As stated in the video it makes little difference from a trading point of view if utilising the FLD trading strategy and interactions with the 20 day FLD. The outlook is still bearish but alters in its degree of bearishness and trough timing depending on the placements.


Here is a phasing analysis of the FTSE placing a 40 week low in October, click on the image to view a larger version:


Note that the 54 month trough is placed in November 2012 (using an expert model) which results in a 18 month nominal cycle wavelength of around 15 months. Placing the subsequent trough after the low of November 2012 required some artistic licence but I settled on December 2014 after comparing 40 week cycles either side.

This analysis of the FTSE places an 18 month trough in June 2015 with one more 18 month cycle to go before a trough of likely 9 year magnitude in July/August 2016. That last 18 month cycle is probably going to be pretty damn bearish.

Also note the 54 month FLD is currently providing support to price. This should be broken as we move into the 20 week trough, due late Feb this year and price should not get back above that FLD until after the 9 year trough. However it may well touch it briefly launching out of the next 18 month trough, we will see. The 54 month VTL has been breached to the downside indicating that the 9 year peak has been printed.


Below for good measure is the phasing analysis of the DJIA, placing a 54 month trough in 2012 and 40 week low at the recent October trough. Looks much more balanced and rhythmic to me, usually the sign of a solid result.

longterms2Generally the US markets are looking more bullish according to this phasing with price a fair way from the 54 month FLD and not having breached the VTL. In common with the FTSE this places an 18 month trough forthcoming this year around the end of Q2 and the 9 year trough late 2016.

One thing is for sure looking at these longterm charts: It has been a remarkable bull run.

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