Last week I wrote about my reasons for thinking that the 20-week cycle trough occurred on 16 June 2014 and I mentioned that the 40-day cycle trough might have formed on Thursday 10 July, a possibility made more likely by the fact that the target generated by price crossing below the 20-day FLD was accurately achieved.
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Price bounced up this week (in the S&P 500) to form a double top, and then yesterday it fell back through the 20-day FLD, and once again accurately reached the target generated by that price cross (the T2 target marked on the chart), and then bounced up again.
The question now is: which of these two troughs is the trough of the 40-day cycle? Usually I would resolve a dilemma such as this by comparing the fulfillment of the targets generated by price crossing the FLD. The price cross which precedes the 40-day cycle trough is labelled a D-category interaction, and it usually achieves the target accurately, but here we have two equally accurate target achievements.
It makes for a fascinating puzzle, but there might be a small clue present in the median price. The target for a price cross is calculated by using the level at which the median price crosses the FLD. I am writing this blog post before the market closes, but here is the current median price:
The median price is lying directly over the FLD. If at the close of trading today the median price is well below the FLD (below 1956) then the target generated in the top chart is indeed the target for the price move. But if the median price ends up above the FLD (above 1956) then in fact price will not have crossed the FLD, but merely fallen back to find support. And if it ends up at about the level of the FLD then we might only see the median price cross below next week, and the target would be at a level of about 1935, and so we could be in for a strong bearish move.
Which trough in price do you think is correct for the 40-day cycle trough?
Have a great week and profitable trading.
