Catching the wave
If you identify a dominant cycle, capitalize on it and ride the momentum.
Analyzing the cyclical behavior of the US equity markets has become increasingly difficult, as it is no longer appropriate to view them as a single market with a simple cycle or composite cycle. The linear perspective of treating the US equity market as one entity no longer holds true, as discussed in my previous article. However, this does not imply that cycles do not exist; rather, identifying them has become more complex and diverse.
There are various ways to utilize cycles, including identifying periods when dominant cycles change direction. These time windows can be used to predict market turning points and make more informed investment choices, despite the fact that cycles occur at different frequencies in global and domestic markets.
However, once cycles are recognized, it is possible to take advantage of the current trend within a cycle rather than simply waiting for the trend to end and anticipating the next one. Predicting the timing of future turning points is one aspect, but understanding if a cycle trend is still ongoing provides confidence in taking action. If confirmed, we can seize this opportunity and ride the wave.
Today, I would like to discuss a potential prominent cycle in the market that appears to be unfolding. This cycle presents an opportunity for us to actively participate and benefit from its movement. It is important to understand the fundamental concept of cycles, regardless of the specific asset class being considered. The focus here lies solely on data and its analysis. Therefore, I have taken out any reference to the underlying assets to avoid interpretation or preconceived investment biases, focusing purely on the cyclic pattern under analysis.
Dataset I - Cycle I
The first dataset reveals a ~350 days cycle projecting the continuation of the current upswing into early 2024.
Based on the identified parameters of the dominant cycle, it is suggested that the current trend has entered an upward phase. This offers a beneficial chance to take advantage of the current phase of the cycle.
Dataset II - Cycle II
The second dataset reveals a ~381 days cycle projecting the continuation of the current upswing into early/mid 2024.
Dataset III - Cycle III
The third dataset reveals a ~382 days cycle projecting the continuation of the current upswing into mid 2024.
Pure data, no subjective interpretation, one finding
We now observe that three different assets exhibit a comparable primary cycle. The identification of this cycle is based on the same criteria, consistently detecting it as the most significant and influential one. Consequently, there seems to be an ongoing nominal cycle with a duration of approximately 370 days, which could lead to the continuation of the identified upturn into early/mid 2024.
It is crucial to approach this analysis purely from a data-driven standpoint and avoid getting caught up in subjective economic arguments or interpretations. The key to capitalizing on this cycle is to accurately identify the current phase of the cycle and track the momentum of the trend.
Here we are, this an opportunity based on cycle analysis. Lets now reveal the underlying assets to allow setting this cycle into context.
I will include the cycle detection analysis tool links as interactive workbooks with dynamic cycle analysis.
Assets under review
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