Mikula Forecasting Company:
Strategy #27: Trading With Dewey
Cycles
====================
Written
by: Patrick Mikula CTA
Copyright (c)2003-06 by Patrick Mikula All Rights
Reserved. (Please to not copy or foreword this article).
Mikula
Forecasting Company
P.O. Box 152672
Austin, TX
78715-2672
USA
www.MikulaForecasting.com
support@MikulaForecasting.com
====================
In this trading article I am going to
talk about the most basic use of the traditional cycle method made popular by
Edward Dewey at the Foundation For The Study of Cycles. This method is simply
to correlate the pivots in the market to tops and bottoms in a cycle. On the
chart below a 30 period cycle has been drawn on the IBM daily chart. At
cycle top A IBM form a significant swing top. At cycle top B IBM formed started
an accelerated down swing. At cycle top C, IBM formed a significant bottom. For
the continuation of IBM data see the next chart.
The final cycle top for IBM is marked with the letter D. This cycle top is
in the future in mid September 2005. There should be another IBM pivot or
market acceleration at this cycle top. This is a very simple method to help
pick the important times when a market is going to move.
The next chart shows the Dow Jones Industrial Average with two cycles.
First is a 27 period cycle and second is a 9 period cycle. The fast 9 period
cycle hits a lot of minor top and bottoms which we are not concerned with. The
important thing to look at here is when the two cycles come together as a cycle
top or cycle bottom. At point A the two cycles came together and a bottom
formed in the DJIA. At point B the two cycles came together and a top pivot
formed in the DJIA. The two cycle again came together at point C where they
formed a top and at this point the DJIA formed a bottom. The next time the two
cycle came together was point D but there was no pivot at D. This was a cycle
failure. At point E the DJIA formed a bottom when the two cycle lines came
together. See the next chart for the rest of this DJIA chart.
There are two new points in this chart F and G. At point F the two cycles
again came together and the DJIA formed a top. the last point G is in the
future and occurs near mid September and the DJIA should make a pivot around
this time. Notice that the 9 period cycle is a 1/3 harmonic of the 27 period
cycle. When you find a large cycle that hits market pivots quite often the
harmonics of that cycle will hit the smaller pivots. You can look at these
charts and see that the faster 9 period cycle hits many small pivots in the
DJIA.
The next chart shows two cycles for soybeans. The
long cycle is a 30 period cycle and the short cycle is a 1/2 harmonic 15 period
cycle. Notice that there are three points on this chart A, B and C. At point A
the 30 period cycle made a top and the soybean market made a significant
bottom. At point B the 30 period cycle made a top and the soybean market made a
significant top. At point C the 30 period cycle makes another top but this time
it is in the future. We expect a market pivot in soybeans when this 30 period
cycle top is reached in mid September.
MORE:
To see the final two charts showing
the U.S. Dollar Index, read the version of this article on the
MarketWarrior
owners page.