We’ve kept a low profile this summer, refining cycles and tactics to give our subscribers a true edge. In the weeks ahead, we’ll ramp up activity and roll out fresh finding and insights. In this article we’ll review the current market and go over one of our new cycles techniques…Hurst Cycles.
Market Conditions: Ready for Takeoff?
For many investors and traders, the market has been stuck in place for more than a month. Individual stock traders in particular have noticed their equity curves flattening as many stocks surge only to give it all back. These choppy conditions can be explained by Hurst Cycles, which we’ve been studying over the summer and will share in the Premium Section. We believe the market is setting up to move higher ahead of the Fed’s September FOMC, where a quarter-point rate cut is expected.
Despite headline shocks and down-cycles, the market didn’t roll over—it corrected in time through sideways consolidation. That’s actually quite bullish. What has kept this market afloat is a mix of bearish sentiment and under-invested buyers stepping in at discounted prices. The Rydex Total Bull/Bear Ratio recently fell sharply, reflecting an underlying distrust of the market. Historically, that’s usually a bullish signal.
The Fear & Greed Model confirms the increasing bearish sentiment building in the market.
However the Smart Money and Dumb Money are both holding their positions and not dumping their equity exposure during shocking headlines coming out of Washington D.C.
Using the Cycles SMA system we can see that the S&P 500 (SPY) is holding the 30 Simple Moving Average (SMA in yellow) and refuses to close below this level. It can be assumed that institutional buyers are buying and supporting the market at this moving average. The 30 SMA is also a very important moving average linked to numerous cycles (we will discuss this in the future). The chart below also shows that the RSI formed a triangle holding pattern in August. We believe that RSI is ready to break out to the upside, as the market prices in the expected FOMC Rate cut on September 17th.
Using the Cycles SMA system, we can see that the S&P 500 (SPY) is holding above the 30-day Simple Moving Average (SMA, shown in yellow) and has yet to close below this level. This suggests that institutional buyers are stepping in to support the market at this key moving average. The 30 SMA is also an important reference point tied to numerous cycles, which we’ll discuss in the future. The chart below highlights how the RSI formed a triangle consolidation pattern in August. We believe RSI is now poised to break higher as the market begins to price in the expected FOMC rate cut on September 17th.
There is the possibility of a sell-the-news even on or after September 17th, as this day is also VIX Expiration day, which often brings significant volatility. In fact, the Hurst Cycles we’ll discuss in the Premium Section sheds some light on this. In conclusion, we expect the market to head higher going into the FOMC meeting. We also expect that offensive sectors and ETFs (QQQ, SPMO, SMH, XLC, XLK, etc,) to reclaim the lead after working off overbought conditions.
In the Premium Section we’ll give our Paid Subscribers a first taste of Hurst Cycles.
Disclaimer - All materials, information, and ideas from Cycles Edge are for educational purposes only and should not be considered Financial Advice. This blog may document actions done by the owners/writers of this blog, thus it should be assumed that positions are likely taken. If this is an issue, please discontinue reading. Cycles Edge takes no responsibility for possible losses, as markets can be volatile and unpredictable, leading to constantly changing opinions or forecasts.