Walter Bressert Is acknowledged as the man who brought cyclical analysis to the futures markets. His recently published book, The Power of Osclilator/Cycle Combinations,defines a new dimension of oscillator and cycle analysis and is the basis for his advisory service Cyclewatch, which began publication in June 1991. Cyclewatch, in addition to using oscillator/cycle combinations to mechanically identify cycle tops and bottoms as they are occurring, uses cycles to forecast time and price moves in the futures markets. His original newsletter, HAL Commodity Cycles, published from 1974 to 1985, was one of the industry's most respected and widely followed newsletters. Profitable 10 of 12 years, it was rated “#1 In Bull markets”, by Futures magazine In 1981, Walt’s forecasts were so accurate that in 1983 Futures magazine stated “He gets the readership he deserves because he Is right so often”. In 1985, the ‘year he went into semi-retirement, his performance was rated by the Commodity Traders Consumer Reportas #1 In the Standard and Poor index. Walt Is a long standing director of the non-profit Foundation for the Study of Cycles and was, in 1979, one of the original founding members of CompuTrac. In 1981 he co-authored the HAL Blue Book, a classic study In the application of cycles and oscillator/price patterns using %R and momentum studies. He has been a contributing editor to the Financlal News Network and has lectured internationally for nearly 20 years. He has also written articles for the Wall Street joumal, Barron's, Future's and the Commodity Research Bureau Yearbook, Walt is also a private consultant to commercial hedgers and traders, Toples You will leave Walter's workshop with a working knowledge of how to combine cycles and oscillators to Identify cycle tops and bottoms as they occur plus five specific oscillator/oycle combinations that you can immediately apply to the markets - weekly, dally and intra-day. The workshop is presented In two sections. Cycles - In the first part of his workshop Walt will explain the four dominant cycles and discuss techniques to find these cycles In the market. The development and use of timing bands and flbonnad rations will be examined to determine the timing of the cycles and specific techniques will be lllustrated for determining the future price levels of cycle tops and bottoms. Oscillators - several techniques will be presented to improve the performance of oscillators, often tuming a mediocre one Into a powerhouse. Walter will explain how to combine oscillators with cycles to Identify tops and bottoms as they are occurring, and will show specific oscillator cycle combinations to Identify cycle tops and bottoms mechanically. Jassaig les, ‘Ans 196, 2 New O, Walter Bressert 9440 Doubloon Drive Vero Beach, FL 32960 407-388-3330 407-388-3389 Fax“ss TAGXIV 1992 CYCLES, PATTERNS AND OSCILLATORS IN THE STOCK MARKET by Walter Bressort ‘The order of the Universe shows itself in the thousands of cycles observable in nature and documented by the Foundation for the Study of Cycles. it shows in the minute structures of molecules, atoms and sub- atomic particles. It also shows in the ordered structure of the solar system and, as scientists are now discovering, in the interrelationships of galaxies. The smallest particles to the largest clusters of galaxies follow some kind of order..s0 why not the markets, Prices move in a manner that may intially appear to be random, but with study, show an underlying order. Cycles, waves, Gann squares, angles, Fibonacci relationships in both time and price, planetary influences and other ‘observable phenomena are rellections of this underlying order. Unfortunately, we do not know its causes, nor do we have a solid grasp of the rules .. but anyone who studies the markets with an open mind will ee that there is indeed an ‘order to all markets, especialy in the formation of highs and lows, which are focal points or high energy levels of a market ‘There are some who arbitrarily dismiss cycles and the natural order of the markets on the premise that such concepts smack of pre-determination and violate man's God-given free will. But with hs free will man can choose to participate inthe markets or not, just as he has the choice to participate, or not, in the cycles of good times and recession through his investments. By knowing the approximate timing of cycles man can use them to his advantage. ‘The predictable cycles of the seasons are there for man to use, and planting corn in November because prices are high ‘would be a waste of time and money. Through observation we know better. Buying stocks or gold at the top of a ‘market is something we all want to avold, but unfortunately the fundamentals are almost always the most bullish, and ‘most tempting, at tops. Without study we are oblivious to the natural order of the markets, which must be actively sought out and discovered. True, we do not know all ofthe rules of the markets, but we do know that we want to buy bottoms and sell tops. We also know that we can rack up sizable profits by trading with the trend, Fortunately for us, the energy of the markets Is visible in he movement of price, which when charted, shows repeating patterns of time and price in cycles and Eliott Waves. Market oscilators also reflect this energy as overbought and ‘Oversold levels. More often than not, these overbought and oversold levels are also cycle highs and lows . By dentitying the lengths of the most powerful and consistent cycles, called dominant cycles, we can often anticipate tops {and bottoms as well as the direction of the trend, or longer cycle. Much of this is explained in my book, "The Power of Oscillator/Cycle Combinations". ‘The 4-Year Cycle in the Stock Market ORME cowra ‘The 4-Year Cycle in the U.S. Stock Market can be “ow | en | tow. traced. back’ to 1788, ahd is the dominant | longer-term cycle affecting the stock market, ule Settng trends that often last for three oF more | 2 years, #| 4 Table 1 lists the 4-Year Cycles since 1917, based at fon the daily close. The column headings are ans ‘elt explanatory. The averages at the botiom of u/s the chart show that the 4-Year Cycle averaged gk 43. months from low-todow, 38 months trom Ba high, and. 13-months from high-to-low. S| 107%, or more than a doubling of the level at s/o which the cycle began. l/s 2 Walter BressertRSI3M3 OSC/CYCLE COMBO FOR BUYING TRADING CYCLE BOTTOMS in T-bonds 1) The low must be 15 to 30 market days from the previous Trading _ cycle bottom. 2) The Trading cycle high must have occurred with the oscillator above the sell line at 60. 3) The oscillator must drop below the buy line at 40 and turn up before or as the price low is made 4) The Trigger Entry is a rise above the price high of the upturn day. 5) The protective stop should be placed below the Trading Cycle low. Computrac/SNAP version 3.6 ‘TAGXIV 1992CCI 30 OSC/CYCLE COMBO FOR 4-YEAR CYCLE BOTTOMS OF S&P INDEX The oscillator/cycle combination that confirmed the bottom of every 4-Yea1 cycle has 5 steps that must be me! 1) The price low must be 32 or more months from the previous 4-Year Cycle bottom. 2) The Detrend must drop below the Buy line at -70 and turn up. 3) The CCI must drop below zero. A drop below the Buy Line at -100, which occurred at 6 of the 9 bottoms, would be comforting but is not necessary. 4) The CCI must then rise above the Crossover. 5) Following the requirements of 1 through 4 being met, the Trigger entry of buying the price high of the month that exceeded the high of the Crossover month confirmed every 4-Year Cycle bottom. It is the safest entry, but not always the one with the lowest dollar risk. CCI58 OSC/CYCLE COMBO FOR TRADING CYCLE LOW IN T-BONDS 1) Prices must be in the Trading Cycle Timing Band (15-30 market days from the previous Tradung cycle low. 2) The cci58 must have dropped below the Buy Line at -25 and turned up. 3) The Trigger Entry is to place a buy stop above the high of the upturn day. 4) The protective stop should be placed below the price low of the Trading cycle. DJIA RSI3M3 OSC/CYCLE COMBO FOR PRIMARY CYCLE BOTTOM 1) Prices are declining into the 13 - 20 week trough to trough timing band (and can extend to up to 25 weeks). 2) The oscillator drops below the Buy Line at 55. 3) The oscillator turns up. 4) Place a Trigger Entry buy stop above the price high of the upturn week. ADDITIONAL INFORMATION NOT INCLUDED IN THE ORIGINAL ze. TAGXIV 1992 Walt BressertAverages, however, are not very helptul in trading a market, so let's look at a market qualifier -- those cycles that ‘exceeded the high of the previous 4-Year Cycle versus those that did not. As you can see in the Tables 2 and 3 below, there is a distinct difference between those cycles in Table 2 that exceeded the high of the previous 4-Year Cycle and those cycles in Table 3 that did not. Column 3 in both charts shows the % advance trom the low of the cycle to the high. The average % advance in Column ‘is grossly distorted by the 372% rise from the 1932 depression low. The average advance with this cycle omitted is ‘only 52%, less than half the 127% rise for those cycles in Table 2 that exceeded the previous cycle high Taste 2 Ce) cE [ smunee| oes] tae mene] aes [ne i re Ee eeles| a TABLES [ISEB IER UE RE ag Be a 4 i # Since the current 4-Year Cycle has already exceeded the high ofthe previous 4-Year Cycle, we will compare aspects of the two types of cycles and also establish time and price projections for the cycle high, ‘Time and Price Expectations for the Next 4-Year Cycle High ‘The smallest advance of all ears in Table 2 was the 38% rise from the 1978 low. The cycles that began in 1970 and 1978 are separated from the other cycles because they occurred in a broad trading range. OF the cycies that were not ina trading range, the smallest advance was 73%, which was met or exceeded in all 9 years not in a wading range. ‘To look at it another way, of the 11 cycles that exceeded the high of the previous cycle, one rose a minimum of 38%, which would be 3260 f calculated from the October '90 low of 2365. Ten of 11 (90%) of the cycles advanced 67-86% ‘or more above the cycle low, which equates to a price objective of 3960 to 4375, ‘Column 5 in both tables shows the number of months from low-to-high. Here again, there isa great difference between the two types of cycles. Those that exceeded the previous cycle high averaged a rise of 43 months trom the cycle bottom. while those that did not exceed the previous high averaged a rise of only 26 months. Focusing on Column § in Table 2, three cycles rose for 31 to 33 months, and the rest topped 42 to 60 months alter the cycle began. Using these time periods from the October 1990 cycle bottom projects a top of the 4-Year Cycle no earlier than April 1993 (31 months) to June (33 months). A continued rise after June 1999 Is likely to be followed by a rise to atleast March 1994 (42 months), and possibly as late as November 1994 (50 months) .. So the initial time period for the top of the 4-Year cycle is April 1993 through November 1994. (ur Time and Price Window for the top of the current 4-Year Cycle is then April 1999 to November 1994 at 3950 10 4375, Walter Bressert 3TXGXIV 1992 4 Will the Fundamentals, ‘Support this Projection ? Based on the current fundamental picture with the focus on the national debs, bank failures, real estate problems, etc. this projection may seem unrealistic. But H you visit the libcary and look at the front page of the Wall Steet Journal for the two years following the cycle bottoms in74, "78, 82 and °87, youwill find different fundamentals, out similar gloom ‘and doom predictions being made as the stock market was rising, and you will find almost NO predictions that were ‘even close fo the price and time levels of the actual tops of each cycle. ‘The fundamentals of supply and demand move the markets, but the focus ofthe fundamental news s aways the most bullish at tops and the most bearish at bottoms, and it will probably always be that way. Cycle analysis can give you the confidence to sell tops and buy bottoms with the expectation that the fundamental picture will change to move prices in the direction of the cycle. Based on this analysis there are mote than two years before the 4-Year Cycle is due to top. The iong-term trend is up, but a lot can happen between now and then, We have another way of looking at the market between now and September 92 based on the historical performance of the stock market relative to the Presidential election. The Presidential Election and the DJIA Through September '92 [A recession and bearish stock market at the time of a Presidential election can result ina loss to the party in the White House at the time of the election, Not surprisingly, every etfort Is usually made to time the stimulation so the economy land the stock market will be up atthe time of the election. ‘Table 4 shows the % advance in the DJIA from September to September of th 3, which will be September 1991 to September 1882 for the upcoming election. Column 1 Is the year in which the 12-month time period ended. ‘The percentage moves for the advance from the September close to the highest daily close through the following September are in Column 2. The months in which the highs of the 12-month period were made are in Column 3, and the number of months from the September close to the highest high of the 12-month period are in Column 4. TABLE 4 Looking at Column 2 you can see that of the 19 years PTEMBER Ti «= AIL19 years rose a minimum of 2.1%, From the ELECTION] “ADVANCE | MONTH] ‘September '91 close of 3017 a 2.1% rise would YEAR DITA, HIGH |” “to HIGH be 3080; 10/1 9/30 2 3 4 -- 90% of the years advanced 3.8%, which would Tie ocr T beai3t: 3% oct. 1 52% Nov 2 ~- 80% rose 5.2%, which would be 3174; a8 Nov 2 23.4% Nov 2 70% advanced @ minimum of 7.4%, which 9.3% DEC 3 would be 3240. 39% JAN 4 12.4% APRIL 7 ‘These are minimum price objectives that should 56% JUNE 9 bbe reached on or before September '92. 19% JULY 10 338 ‘AUG u Looking at Column 3 you can see that 10.5% ‘AUG un 200% AUG u 7 of 19 years, oF 37%, made the highs of the 21% SEP 2 ‘12-month period by January, while 11.6% SEP 2 201% SEP 2 - 11 of 19 years, or §8%, made the highs June 223% SEP 2 through September. 293% SEP 2 29.4 SEP 12 Odds are that if new highs are made after 126 66 January, the high of the 12-month period is ikely to be made June through September. Walter BressertTime and Price Patterns Patterns of time and price can help set expectations forthe highs ofthis 12-month period, Five years made highs in Oct/Nov. and four of these rose only 2.1 - 5.2 % above the September close... $0 if there is to be’an Oct/ Nov high itis likely to be made at 3080 to 3174 basis the dally close. ‘Six ofthe eight years that made highs December through August rose 7.7 to 12.4%, which would be 9249 to 3391 this yea: and of Sx Years that rose more than 12.4%, ALL rose to 20 - 29%. or 3620 to 9804, Time and Price Objectives So, our time and price objectives for the high of this election year time period has thvee tiers: 1) ifthe high of the 12-month time period is to be seen in Oct/Nov, a minimum high of 3080 to 3174 should be seen I this priee range is not met in Oct/Nov or if the DJIA exceeds 3174, then 2) the high would be expected to occur at 3249 to 3391, in the Dec/Aug time period. And if 9391 should be ‘exceeded, then 9) a tise to 3620 to 3904 Is likely to be s sn in the month of September. ‘These objectives and the Window for the 4-Year Cycle help determine longer- term expectations, but itis the weekly Primary eyele that is of interest to most traders and mutual fund switchers. ‘The Weekly Primary Cycle ‘Al markets have a powerful and consistent weekly cycle that sets the intermediate-term trend. By identifying this cycle itis possible to: 1) anticipate tops and bottoms, and 2) datarmine the tend. ‘An historical review of the DJIA and the S&P Index shows a cycle of approximately 20 weeks as measured from low-to-low. However, cycles In the market do not move in sine waves, but often extend, contract and sometimes seem to skip a beat. Markets also act differently in bull and bear markets, leaning to the right in bull markets to produce right and leaning to the left in bear markets to produce left translation. Timing Bands for a Bull Market By studying the historical performance of bull and bear markets this shifting of highs and lows can be used to our benefit. The stock market has been in an extended bull market that is likely to continue over the long term. The following Timing Bands, derived from the bull market, have been 80% accurate in the past and are likely to be as accurate in the future Low to High .. expect the cycle to top 9 10 16 weeks from a cycle bottom. High to Low ... Once the cycle has topped, expect the cycle to bottom 1 to 9 weeks from that top. Walter Bressert 5 TAG XiV 182Low to Low .. measuring from the low that began the cycle, the next low should normally occur 13 to 20 weeks from that tow. The most probable time for the cycle to bottom Is the overlap area of the high-to-low and low:to-low Timing Band, ‘These Timing Bands are for bull markets. Remember that these are 80% bands, and about 20% of the time the market will top of bottom outside of the bands, Following a top or bottom these Timing Bands will ive you a reasonal expectation of when to expect the next high fF low ofthe cycle, and oscillators will help you identify the top or bottom Time and Price Windows Price can be combined with time to produce a Time and Price Window in much the same manner as the objectives were established for the 4-Year Cycle high. These Time and Price Windows are shown on the chart below as boxes at the tops and bottoms ofthe price bars. ‘The actual tops and bottoms of the weekly Primary Cycle are identitied and ilustrated by the cycle glyphs just below the price bars of the cash SAP Index. The tops and bottoms of the cycles are shown by the dashed lines in the lower, panels with the oscillators. S & P CASH - case tn TAY GL §§ NOV IAN RAR HAY gp BEP WOW TANT WAR FAY jg SEP HOV TA oy L 1 L 1 1‘The middle panel, RSI 33. is a mosified Relative Strength Index, and the lower panel, CCI 58, is a modified Commodity Gisnnel Index. The CClis a longer-term oscillator that shows the cycle highs and lows more clearly than the sensitive ASI which usually turns earlier, and also more frequently Buy/SellLines Both oscillators have Buy and Sell Lines which are levels that serve as filters to help identity cycle tops and bottoms. ‘Rs a general guigeline an oscillator wil rise above a Sell Line and turn down at or before a cycle top: and an oscillator ‘will drop below a Buy Line and turn up at or before a cycle bottom. A glance at the oscillators will show that there are often two oscillator highs in each 20:Week Cycle, and that itis cadally the ‘second one that occurs at the top of the cycle, This is the result of bull market right transiation. In bear ‘markets let translation would usually result in the cycle topping with the frst oscillator high. Four Steps to Identity Cycle Tops and Bottoms We now have three of the four steps to identity the tops and bottoms ofthe cycle; 41) Prices should be within the Time and Price Window, (or atleast within the Timing Bands). This eliminates most of the early turns n the oscillators. 2) One or both oscillators should have risen above a Sell Line for a cycle top, or dropped below a Buy Line for a cycle bottom. 3) An oscillator should turn down at the cycle top, or turn up at the bottom, ‘These three rules alone will help Identity cycle tops and bottoms. but the real key Is the mechanical Trigger Entry, Which is usualy a sell stop below the price low of the downturn week, or a buy stop above the high of the upturn week 44) Place a sell stop to go short below the price low of the downturn week, or a buy stop to go long above the high of the upturn week. Notice how the longer term CCI 58 and the shorter term ASI 33 complement each other in the identification of the cycle Tops and botiome At Highs A and B itis the CCI 8 that clearly Identifies the tops, and at Lows Cand D itis the RSI 39. that better identifies the cycle bottoms, ‘These are Oscillator ‘Cycle Combinations (OSCARs)that can be historically tested. High probability OSCARs can be cataloged and used to identify cycle tops and bottoms as they occur and to trade the markets. ‘Similar patterns can be developed and used on daily and intraday data, ‘This overview should give you an idea of how cycles, patterns and oscillators can be used to determine trend to identity cycle tops and bottoms as they occur. Walter Bressert 7 TAG XIV 1992Chart 6 TACXIV 1992 8 Walter BressertChart 7 SEASONAL CYCLE PRIMARY CYCLE % PRIMARY CYCLE TRADING CYCLE TC crest ALPHA/BETA CYCLE : i PRICE activiT CYCLES crest Y "aA a weEEKS 1/2 PC 72PC ou Walter Bresen 9 TAG XIV 1992TOPS AND BOTTOMS OF INDIVIDUAL CYCLES ARE OFTEN DISTORTED, OR LOST, IN THE COMPOSITE CYCLE Chart 8 Composite Cycle ey Cycle 1 /\I\I\\ Cycle 3 NMIVIVVVW\ 10 Walter BressertChart 9 (WIIVIVJVVJVJV A SIMPLE CYCLE Figure 3 oe “THE TREND OF THE LARGER CYCLE ~y Figure 4 SIMPLE CYCLE SMALLER CYCLE COMBINED WITH TREND t r RIGHT TRANSLATION LEFT TRANSLATION As the Trend of the Larger As the Trend of the Larger Cycle Moves UP Cycle Moves DOWN (BULL MARKET) (BEAR MARKET) Figure 5 ee Walter Bressert 11 Tac xvPRIMARY CYCLES Chart 10 S_ & P cas = Weekly Ronge 7 7 E ggg a Wh AN Ne NY AY GOLD 18-Week Primary CycleTRADING CYCLES Chart 11 S_& P FUTURES - bait ‘ “ng a ny af a «lt gE 1 ‘ya at k yh ye “ vs S&P/DJIA 39 Market Day Trading Cycle T=BONDS _ ~ deity ie, cc fw. i t 1 ' T-BOND 21 Market Day Trading Cycle GOLD 1 ‘HA a a COMEX = Dail he “Say i He re mat ” GOLD 15 Market Day Trading Cycle TAGXIV Walter Bressert 13, 1992THE COMPONENTS OF INDIVIDUAL CYCLES CAN BE MEASURED AND QUANTIFIED TO PROVIDE TIMING BANDS Chart 12 qe PRI we CYCLE ! N ' TROUGH TO TROUGH > 1) trough to trough (T-T) 2) trough to crest (T-C) 3) crest to trough (C-T) PRIMARY CYCLE TROUGH TO TROUGH 1) Pc T-T 2) First 1/2 PC T-T 3) First 1/2 Pc T-c 4) First 1/2 PC C-T 5) Second 1/2 Pc T-T 6) Second 1/2 Pc T-c 7) Second 1/2 PC C-TTHE SEVEN CYCLIC COMPONENTS OF THE TRADING CYCLE ‘The interplay between the Trading cycle and the Alpha and Beta cycles has 7 cyclic components that project time periods for cyclic crests and troughs to occur. Most markets will follow the Trading Cycle, Alpha Cycle/seta Cycle pattern shown in Example 1-5. Chart 13 1) Trading cycle Trough to Trough 2) Alpha Cycle Trough to Trough 3) Beta Cycle Trough to Trough 4) Alpha Cycle Trough to Crest | ut 5) Alpha cycle Crest to Trough } 6) Beta cycle Trough to crest aveva t 1'cycte Trough to 7) neta cycle crest to Trough | ae (2 TRADING CYCLE Trough to Trough a TAG XIV Walter Rressort 15 1992THE PROBABILITY OF MAKING A SUCCESSFUL Chart 14 ‘TRADE IS MUCH GREATER LATER IN THE ‘TIMING BANDS THAN EARLIER While Timing Bands are ranges within which prices have topped better than 7 times out of 10 in the past, the proba- bility of making a successful trade is much greater later in the Timing Bands than earlier. Normally, 70% of the cyclic tops and bottoms will occur within the range of the Timing Band; 20% will occur before the Band, and 10% will occur after the Band. So, by the time the last ‘day of the 70% Timing Band has been reached, 90% or more, or the cycles would have already topped, or bottomed. Chart 15 ONDS = VEEL RANGE - NEAREST euTuaE: — TAGXIV 1992 16 Walter BressertTHE SEVEN CYCLIC COMPONENTS OF THE TRADING CYCLE The interplay between the Trading Cycle and the Alpha and Beta cycles has 7 cyclic components that project time periods for cyclic crests and troughs to occur. Most markets will follow the Trading cycle, Alpha Cycle/seta Cycle pattern shown in Example 1-5. Chart 13 1) Trading cycle Trough to Trough 2) Alpha Cycle Trough to Trough 3) Beta Cycle Trough to Trough 4) Alpha cycle Trough to Crest | Hy 5) mip oyeie crest to trovan —[f I i levers eres ire 7) Beta cycle crest to Trough | ana ea (2) (3) TRADING CYCLE ‘Trough to Tough a TAG XIV Walter Bressert 15 1992TIME CYCLES/OSCILLATORS TO IDENTIFY TOPS & BOTTOMS Using oscillators within the cycle timing band periods greatly improve the accuracy of identifying cycle tops and bottoms. All markets have cycles. However, all too often, they contract, extend, or skip a beat. Predictability can be greatly improved by using cycle time periods, or timing bands, measured from historical highs and lows. For example, over the past 10 years 80% of the bottoms of the dominant weekly cycle in the S&P Index have occurred in a timing band 13 to 20 weeks from the previous cycle bottom; 80% of the tops have occurred 9 to 16 weeks from the low that began the cycle; and 80% of the bottoms have occurred | to 9 weeks from the top. These timing bands are illustrated below: -- 16 weeks low to high -- 9 weeks high to low - 20 weeks low to low Oscillators indicate overbought and oversold levels. Cycle tops and bottoms, by their nature, are overbought and oversold levels tied to specific time periods. By combining oscillators and cycles, tops and bottoms of cycles can often be identified within 1 to 3 bars of a top or bottom. ‘The next page is a chart page showing the weekly and daily S&P Index, with oscillators stacked below each chart. The following charts are the same charts as those in the included Bressert TradePlan on disk except for the addition of cycles in the following charts. TAGXIV Walter Bressert 17 192Weekly S&P_INDEX 3/81 to 12/82 With Centered Moving Average and Centered Detrend ‘The lows and highs of the 20-Week Cycle are identified by the dots in both the chart and the Detrend. while the cycle highs and lows that show up in the Detrend match the price highs and lows of the chart above it, this is not always the case. sememw Chart 16 saitie aaa in WL ae \ i i! Ul > la L 1 i! No Ht : yn " Hy TM 1 S&P INDEX Weekly Cash - 3/83 to 2/90 With 20-Week Centered Detrend senc-w Chart 17 00208 A complete cycle phasing should be done over the longest possible data time series, normally 20 to 30 years, but this 6.7-year period, which has a smaller sample base, will serve to illustrate both a basic approach to cycie analysis and important characteristics of cycles. During this time period there were 16 cycles. The time periods from low-to-low are listed below from the longest to shortest time periods. 13 15 16 17 18 18 21 21 -M- 22 22 24 26 28 29 30 33 The median length, marked M, is between 21 and 22 weeks, or 21.5 weeks for this time period. Since 1950 the median length has been 22 weeks. Seventy-five percent of the lows occurred 15 to 26 weeks from the previous low, which is a 75% Timing Band that is very close to the 15-25 week Timing Band from the 1950 time series. 18 Walter Bressert‘Od PETEqeT eze smot aToéD Azewtza eyL_ “3zeYO ey JO Teued woZ}0q a4} UT puerzeq pertequed AeG-ST 9U3 UT peTsTQUePT OSTe ere YoTYUM ‘saToAD buTpeIL ayy gO syzbueT |yz smoys Zreyo BYR Jo Toeued doy suL “9zS068 YbnozyR sT6oEE Wor PTOb Jo yowszqUoD Aqzeeu oyy Jo yazeYO ATTep & ST**"e-C WRIVHO or- oF ace sen voy ven aes use 20 non 320 yg tl “thy let un ty ‘se506e ‘0-0708, eb wey puez3eq perequep Aea-sT UIT 68/S-88/6 PToD ATTea TAGXIV 1992 19 Walter Bressert03 te 28 6 vor ar a1. pl 8 ae | it! Ni ahh o eu € og peo ee oF 9 €1 St wl 81 be nes 8 Nady! 502006 ‘M-SONO * puez30q perezUeED YeeM-TZ UIT 06/T-€8/E pucg-L ATI90M 6L Mey Walter Bressertsé fe br bl be Bl og BI OBI OIF wy OO A FPopdtns aa™d € sl u sok sosoce BT F osane 0z HeyD puerjeq pezezueo Aeq-12 WITH 06/z-88/6 spuog-1 ATTea a TAG XIV 1992 Walter Bressert 21TAGXIV 1992 Chart 21 t f 27.58 lg ll ag tg gl 2.0 kum AER = anaes iH c it = 4 st £ s EE ge a OE Chart 22 porace awzz.oe : ih it: 319.09 sg lth il ily itt ily gl. 2 Slt i bh or nh = vl iu a pope Sky, Pg ESu OF chide "Enel Bee Her Jun SSE. szesse Chart 23 “ ie os Se rf .ee hi 1 es hig ay lt itl Li fg i} "gl ti se ‘ ro . Te ize Bede, gga, Ede Eas Minds SBE: szoeas BercZisePa BEF ho ne eee oe 22 Walter BressrtCHART D-16...shows a centered 20-Week Moving Average running through prices of a weekly S&P Index chart from 831202 through 870515 in the top panel. The highs and lows of the 20-Week Primary Cycle and the Seasonal cycie are indicated on the price chart. The lower panel is the 20-Week Centered Detrend with the Primary Cycle highs and lows also indicated. The 20-Week Cycle highs are all above the moving average and easy to identify. The 20-Week Cycle lows are all below the moving average and are also easy to identify. Weekly S&P Index 12/83-5/87 With 20-Week Centered Detrend Chart 24 on pone [ 5 aay | fon . § c s i 140 f 5 : 1 to, . . id ph alti thai i Hl: i! t uf “Ih wo \y i | i i Wi if i” a ala 12783-5787 With 20-Week Real-Time Detrend Chart 25 scocmw 70838 sou a - t et : ih | | fs . bb, wf Hoang, i it ah) il ° ery es Ti My i : | Walter Breseert 23, TAG XIV 1992woos 9z HeyD puez30q YOOM-OT UIT £8/S-€8/ZT 3s ATY2°M xueds-31eH © peTTvo St pue ‘pusrjeq pezequeD e se oues ous qeymeuos atoko 724; JO SMOT pue SYUBTY auy FUSTTUTY OF PUEy TTTM eTOAS e Jo ueds ut, 943 JTeY-euo st 3eY] obereAe HuTAcU Y* Walter BressertCHART D-16...shows a centered 20-Week Moving Average running through prices of a weekly S&P Index chart from 831202 through 870515 in the top panel. The highs and lows of the 20-Week Primary Cycle and the Seasonal cycle are indicated on the price chart. The lower panel is the 20-Week Centered Detrend with the Primary Cycle highs and lows also indicated. The 20-Week Cycle highs are all above the moving average and easy to identify. The 20-Week Cycle lows are all below the moving average and are also easy to identify. Weekly S&P Index 12/83-5/87 With 20-Week Centered Detrend Chart 24 seoc-w 2705: oe Th | | aes f 3 F 5 5 1 sao Ine a . oe on ee - WL MI i ar wT mye yp " - ut Ml, Mah TOT ly! yi Phy i \ Ny $ s s I a Weekly S&P Index 12/83-5/87 With 20-Week Real-Time Detrend Chart 25 sepcmn a70835 S oe ja 14 . 1 lhl : Aan iy | Mi i ail Vi . aT mr re : le: Ml wi" 7H Wolter Bressert 23 po TAG XIV 1992keh aes AON Oy ABH Gag AON BMY Ae Gea AON _BnY fen aad moba8e 9z HeyD puez30q YOOM-OT UFTM £8/S-€8/2T a3s ATOM qeymeudos atoko 3eUR JO SMOT pue SYbTY oy IUoTTUTY OF puea TTTM eTOAS e Jo ueds owt; oy; JTeU-suC ST 3eUR ebeTeae Hutaou y* Walter BressertWeekly S&P Index 12/83-5/87 With Levels and 10-Week Detrend Chart 27 roe 2298 aoe "1 | 5 sl pond aie eee A ro | | t ; atatt ; im is mt fe = —$. RTL H L TT i« . bot a ae Ey LL a Hi Ae t ‘ s wTs I Current-time Detrends have another characteristic that turns and lows tend to move to that are often about to form. letrending into an important oscillator by itself. The Detrend highs Levels" above and below the moving average indicators that a cycle high or low is forming, or Weekly S&P Index 8/86-2/90 With 10-Week Detrend Chart 28 en 1209800 a0 - mae wh nl r evi it Wl see shyt | . . tite | 200 i gill phe | ase ote ayn . G 1 en : i ie ae -38 iit | i ~ Walter Bressert 25 TAG XIV 1992SEVEN TECHNIQUES TO ENHANCE OSCILLATOR PERFORMANCE 1) PRICE/OSCILLATOR TURNS 2) SMOOTHING THE OSCILLATOR 3) LEVELS, OR BUY/SELL LINES 4) CROSSOVER LINES 5) THE ZERO LINE 6) PRICE/OSCILLATOR PATTERNS. 7) SETUP/TRIGGER ENTRY PATTERNS 26 Walter BressertSMOOTHING TURNS A SLOPPY OSCILLATOR INTO AN ACCURATE INDICATOR OF THE BOTTOMS With RSI and Smoothed RSI Walter Bressert 27Daily with trading cycle Bottoms Chart 30 gonos-o PC. PC s00209 yoo face [tor [oe fon Pap me Sof ye eh ow --Trading Cycle bottoms identified with Buy Lines and oscillator turns. --Longer-term RSI with Buy/Sell Lines help identify Primary cycle tops and bottoms. Chart 31 _. mati] i ig ent alt kt hg Ap ig pe 28 Walter BressertChart 32, i ah dE Cc L JApe92 [May92_ [dun92_ {Jul 92, [Aug92_ |Sep9z Chart 33 ip105 004 a ~ 400,00} pole Begum ved frstany mov_avg [IKarsal “Tapa TMay92—[dund2 [Jul92Taug92“1Sep92. ay TAG XIV 1992 Walter Bressert 29Chart 34 t Tiiped2“““" fWaus2"iJun92Jul92Augd2_——(Sep92. | Chart 35, ——_ a jr nO Tapes “Tiay92_—“iJuns Tauig2 Taga S82 30. Walter BressertChart 36 oy hl Mi na Spel My I TC - sas titan? ““““Tapraa “Taube “duns buts“ Tauggd “Sense | Walter Bressert 31DAILY T-BONDS With 10, 20 and 40-Day Stochastics Chart 37 2onos-o A DB. 200202 igo |A 32 Walter BrossertDAILY T-BONDS (4-Week Cycle Lows) --Detrends show cycle bottoms --CCI, Smoothed, identifies cycle bottoms with Buy Line and oscillator turns. Chart 38 too 105 004 100,004 Hard: Taped “thay Se “und T5urd2 Thugs2“iSen92 | TAG XIV Walter Bressert 33, 1992Chart 39 3 Contract Buys at Trading Cycle Bottoms With CCI Setup and Trigger Entry A Be DE r oo 8 1 J K L Teum —PCSOP ETRY. BTR, WO.1 NOLS) MO. W0.2$ W.3$ Mo. 3 TOTALS WOR «DIR PRICE.-« PRICE «DATE. PRICE. AMOUNT. «DAYS AMCOWT. MOOT. DATE AMOUIT 1 UP 86,81 87.91 640930 88.92 10000 NSD 1280 asn0s 3430 2 2 89. $0.50 1000 2 9 310 asl40s 1400 3 Bm a. 89.03 1000 4 amo 2350 902094760 . oe ®. 90.16 1000 1 101220 0902093560 5 mk 0 6 Bm 88.28 1000 4186010100 #90810 12660 7 @ 30.05 1000 2 Wo 10320 9081011760 sR 89.91 1000 0 3590 8470 9081013060 9? 97.50 1000 1 "530780 8908102310 0 oP 98.56 100 «= 2 20708003070, um 0.00 L “80 2 aM 96.75 1000 5 2060 30 8917190 BoP uP BM 10000 1424038960 sesso Different time frames used for different cycles. TAGXIV 192 34 Walter BressertTAG XIV Walter Bressert 35 1992Weekly Japanese Yen 1/2/81-2/9/90 THE DETREND GIVES BETTER With 3-10 Moving Average and BUY PATTERNS 16-Term Crossover Detrend Chart 42 | San ] ae TACXIV 1992 36 Walter Bressert1 ar ane 7 Mee lt ce 2, in il 1 { hy Chart 43 Chart 44. te SA pari in a oon = = ‘Walter Bressert 7Weekly Japanese Yen ~ 9/8671/90 MACD Det With 3-10 Detrend, With Crossover and 10-Week Detrend Chart 45 --Use Buy/Sell Lines to identify high probability tops and bottoms --Longer-term MACD identifies cycle tops and bottoms 38 Walter BressertWALTER BRESSERT & ASSOCIATES 1987 N. Oracle Tueson AZ 85704 602/544-0404 600/677-0120 FAX 602/544-0081 CY CLEWATCH RESEARCH REPORT BEAR KISS INTHE DAILY S&P FUTURES “The futures data we use Is a rollover", with past history adjusted for the spread between the old and the new Contract on the last day of the month preceding delivery. This makes the oscillators more consistent, but ‘somewhat distorts prices prior to the current contract. ‘This OSCAR usually occurs inthe later stages of a downmove into a cycle bottom of the Trading Cycle or Alpha Cycle, and can be used as a signal to go short, as an indicator of a bottom anda buy signal. of both. ‘The OSCAR is formed as follows: 1) The daily 3-10 Oscillator in the S&P futures rises from below the Crossover for two or more days and turns Gown while stil below the Crossover. This downturn is the Setup. Only the first downturn can generate an ‘OSCAR, and the 3-10 must rise above the Crossover and drop back below it to set up another OSCAR. phen, EW ENTRY ‘ SW ENTRY rye N Feet Lt oe 3-10 Cbrepel aT Leet CROSSOVER CROSSOVER 12) The Trigger entry occurs with a drop in the S&P below the downturn day, which usually occurs within two ‘days of the downturn day. In the DAILY S&P FUTURES CHART below, the a.rows show the downturn day for the 3-10 Oscillator in the lower panel, and the cyr'> low that follows is indicated-- AC=Alpha Cycle low; TC=Trading Cycle low: PCs 22:Week Primary Cycie low: 1/2PC = 10-Week 1/2 Primary Cycle low. The arrows is the lower panel point to the 3-10 Oscillator high and downturn that set-up the OSCAR. Notice how 3 OSCARs occur in 4 months in. the bear market into the Sept/Oct 1990 low, and only 2 OSCARs occur in the bull market Chart 46 BEAR KISS IN THE DAILY S&P FUTURES Walter Bressert 39 TAG XIV 192CYCLEWATCH RESEARCH REPORT BEAR KISS IN THE DAILY S&P FUTURES ‘The table below lists the 8 patterns completed with a Tr recent pattern that had a Trigger Entry on June 20, 1991, er Entry since August 1989, including the most BEARKISSINDAILY SSP FUTURES Chart 47 1 2 3 4 5 6 DATE LOW OF Low OF No. DAYS CYCLE DNTRN DY DNTRN DY MOVE DROPDOWN BOTTOM 390913 374.70 371.30 0.98 2 re 391215, 371.40 © 364120 1:98 2 tC 900123 351.30 342.10 2.68 5 AC, PC 900615 378.30 © 367.60 2.88 8 ac, 1/2PC 900802 363.60 346.10 4.88 2 ‘Ac’ 900920 321/20 306110 4.78 6 ac 901224 336.90 316.00 6.28 13 ‘TC, PC 910619 377,05 370.10 1.88 6 Te COLUMN 1 is the date of the day that turned the 3-10 Oscillator down, or the downturn day. COLUMN 2s the low of the downturn day in the S&P. COLUMN 4 shows the % dectine from entry (the low of the downturn day) to the cycle low. The declines were from 9% 10 6.2%, COLUMN 5's the number of days from the downturn day to the cycle bottom. The bottom occurred trom 210, ‘8 market days following the downturn day for 7 of the 8 OSCARS, with one extending to 13 days. So expecta decline to last for 2t0 8 days, COLUMN 6 shows the type of cycle bottom, which was always a Trading Cycle low or an Alpha Cycle low. “Three were also bottoms of the 22-Week Primary Cycle and one was the bottom of the 10-Week 1/2 Primary Cycle. Expect a Trading Cycle or Alpha Cycle bottom to occur 2 to 8 days after the Trigger Entry at a dectine of 910 6.2% from the Trigger Entry price. A cycle bottom will often occur as the 3-10 turns up, although there can be one or two oscillator upturns before the cycle low. | recommend that you research the samples in the tables and become familiar with them before you trade them. ‘The table does not show the OSCARs that set-up but did not trigger an entry. The number of samples in this OSCAR Is small, and you should build up the sample size. Variations of this OSCAR occur in other markets, and in other oscillators. With a lit research you can develop your own OSCARS. 40 Walter BressertCYCLEWATCH "FUTURES" MONTHLY REPORT OSCILLATORS Chart 48_ Chart 49 Weekly DJIA index (D,IA-W) ... The 22-Week Primary Cycle bottoms are indicated by the arrows, The oscillator is the modified RS! in the rhe Power of Oscillator /Cycle Combinations” Iti an excellent short-term oscillator that often turns as the market turns. The timing is right for the PC to bottom, and an upturn of this oscillator to form a price/oscillator divergence would be a powerful indicator of the PC ‘bottom, Dally SP Index (SPC-D) ... Trading Cycle lows are indicated by the arrows; Alpha Cycle lows by A... The dally S&P Index has a 3-10 oscllator piotted bemw" it with a 16-day crossover. This is an excellent short-term ‘oscillator that tends to turn as prices tur. The oscillator completed a sell pattern at X as the oscillator turned down below the crossover ‘on 6/19. Based on similar patterns, odds are {80% that the TC will bottom no later than 9/1 above 406 ...A similar pattern occurred at Y as the last Trading Cycle and the 1/2 PC bottomed, and at Z.. Arise above 415.80, the high of the upturn week, after mid-morning Monday, will be conficmation that the TC and PC have bottomed. Walter Brossert 41 TAGXIV 1992