DJIA: Hurst Cycles - 1st September 2022
The DJIA peaks from a 20 week nominal component top in mid August & hits targets to the downside around 31800. We look at the incoming 80 day nominal low and the price action to come
As in the S&P 500, the move from what was highly likely the 20 week nominal low in mid July was a vibrant bear market rally, forming an almost insignificant 40 day component trough on the way. This was somewhat of a surprise from the last report as the 40 day component had been fairly dominant and would usually have been expected to retain it’s amplitude. As it happens the 80 day component has come to dominate with the current move looking like it will form an almost perfect retrace from the previous 80 day nominal low on July 14th (also the 20 week low). See medium and long term charts below for a visual clarification of this.
Our original target of 31800 in early August has now been met and FLDs are lining up in a somewhat bullish cascade (short term chart below) for the 80 day component low. That component is running at around 71 days according to Sentient Trader and around 56 for the more accurate time frequency analysis. This frequency is reflected in almost all major global stockmarkets, with very minimal modulation.
At the short term and most pressing phasing at the time of writing, we are assuming the previous 20 day component low occurred around the 23rd/24th of August and price is close to the 80 day component low, due early September. We are expecting some support around the 20 week FLD (dark green, short term chart), similar to other US indices. In commonality instruments periodic components only differ in amplitude over time, most notably the 80 day component here in the Dow.
Medium term price has been distinctly resisted by the 40 week FLD. As we discussed in the S&P 500 report there is still some doubt as to the position of the 40 week component low, it possibly occurred with the 20 week low recently. However, our phasing below retains the 40 week low placement in March of this year and the powerful resistance at the 40 week FLD strengthens the case for it’s current position. Time will tell as always.
The longer term picture remains largely unchanged, we are heading to the 18 month nominal low either in October or late December (depending on 40 week component placement) this year. It is highly likely there will be some support at the 54 month FLD for a period before price breaks down through and creates a target to the downside for the 54 month nominal low, due late 2023 / early 2024 at this point. The 54 month FLD is orange on the long term chart.
Components greater than and including the 18 month nominal cycle
Components less than and including the 18 month nominal cycle
Components around the 80 day nominal cycle
Wavelet convolution output targeting the 80 day nominal component
Interactions and price in the FLD Trading Strategy (Advanced). This looks at an idealised 40 week cycle and an array of 3 FLD signal cycles. We apply the instrument’s phasing to the model and arrive at an overall summary for the interactions with the 20 day FLD, current and forthcoming.
Sigma-L recommendation: Buy
Entry: 10 Day FLD (risk on) / 20 Day FLD
Stop: Below formed 80 day nominal low
Reference 20 Day FLD Interaction: A4
Underlying 40 Day FLD Status: E2
Underlying 80 Day FLD Status: G
As in the S&P 500 the above interactions and trade assume the 20 week nominal low occurred 14th July and the most recent 20 day component low occurred around the 23rd/24th August.
Price is currently around the 20 week FLD support and should begin to settle over the next week or so. Resistance at the 40 week FLD is clear and that resistance reduces over the coming month as the FLD moves up. Expect price to track it to the level of around 32500 to 33000, a convergence of both 20 and 40 week FLDs.
If you do not have the use of Sentient Trader use these settings to plot FLDs in your trading software (daily scale) to more easily follow trading signals and strategy from Sigma-L.
Make sure to account for non-trading days if your broker omits them in the data feed (weekends, for example). The below offsets are given with no added calculation for non-trading days.
80 day nominal: 71.5 days | 36 day FLD offset
40 day nominal: 32.8 days | 16 day FLD offset
20 day nominal: 15.6 days | 8 day FLD offset
10 day nominal: 7.6 days | 4 day FLD offset