What leads, technicals or fundamentals? Does a price chart discount all fundamentals? These debates rage on, but I can say with the utmost accuracy that cycles are great for predicting in the next explosion of activity. A rally or a sell off, no matter cycles have an uncanny knack of being on the money when either is in the infant stages.

The latest cycle for the SP500 chart is below. The trend has been up and I have numbered the cycle tops from 1 to 5 in heavy red. One was the news of Greek debt issues, or more precisely QE1 ending, four was the Japanese Tsunami, two and three were not material. What will 5 be? I am not sure yet, but mostly likely the pricing in of QE2 ending masked in another euro debt story just to fool the mums and pops.

We are never keen to trade cycle peaks that are against the trend, but this time I feel its different. Should five be more like one, as both are consulted by the ending of a QE episode. I am not saying a flash crash is to be upon us (but never say never), but we are due for a doosie. I would not take a position base on the Hurst cycle roll over alone, I would need to see confirmation by some selling by the big boys first (via our tool RTT TrendPower). Watching and waiting.

SPY Cycle

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SPY Gann Angle

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