"C" on Cycles: Part IV, ChartsEdge cycles analysis with weekly and longer-term forecasting

This post gives a double for our cycles review weekend! We've got the weekly forecasts from ChartsEdge for equities and gold (see their charts below). And I'll also review this as Part IV in this weekend's discussion about cycles. ChartsEdge starts with a set of cycles that's apparently similar to those used by other cycles analysts, including but not limited to the 4-year cycle, shorter-term trading cycles, and others that are both shorter and longer-term. Then they analyze for coincidence using a neural net, and use that analysis to generate actual forecast charts of what to expect for the days, weeks and months ahead.

Neat, isn't it? The depiction as forecast charts makes it intuitive to see where cycle toughs (lows) and crests are likely to show up - the only downside being, it can lull us to want to "set it and forget it" which is never a good idea, in my opinion. My preference is to use them in conjunction with what other methods are saying.

If these cycles-based forecasts aren't perfect predictors of exactly when market prices will get to what levels, it's because cycles analysis itself is not just science but art as well. For example, some analysts believe that the 4-year cycle bottomed in 2006. Others point to January or March, 2008. Which is it? Then there are long-wave cycles like the 50- or 60-year business cycle, a 72-year cycle and a 90-year cycle I've seen discussed, not to mention 22-day trading cycles, and yet others. Some of the cycles can extend. If shorter trading cycles bottom when longer "seasonal" cycles bottom then they can make a lower low, but if the timing of one of them distorts then it lends uncertainty. Personally, that make me just as happy that ChartsEdge runs them through a neural net and presents a visual depiction of the probabilities for how they will play out!

Naturally any one ChartsEdge forecast won't be able to factor in adjustments and biases from market-moving events. Sometimes a forecast ends up showing the timing better than the level of market price. And, less often, a forecast starts to show mid-way through that it isn't "working," and deserves less reliance that day or week. Also, their projections for what's a higher high or a lower low must have some degree of discretion, I would think ... but I'm not the expert, so detailed questions really should to go Mike Korell at Chartsedge (in the "other sites of interest" listed at right). But I did post some background information about this at Cycle charting and how to understand the ChartsEdge weekly and longer-term forecasts (2/16/09 at my "No Bull, No Bear, No Bias" [NB3] education blogspot).

Having said all that disclaimer stuff - cycles really do bring a lot to the table in terms of being able to know when a market is trending or turning. And I do believe the ChartsEdge forecasts are remarkably helpful more often than not. We are able to display their week-ahead forecasts each weekend; their longer-term forecasts are available only by subscription.* Below are their forecasts for the week ahead in equities and gold:



*(The subscription includes a link each week to their daily maps too. Often the daily maps are also available openly at Chartsedge Daily Market Maps (included also in the feed under the "other sites" list at right). Those daily maps are normally posted here by or at 8:00 a.m. weekdays; you need the subscription link to be sure of getting the daily maps regularly when posted at ChartsEdge. I'm not addressing their daily maps in this Part IV about cycles because ChartsEdge's daily maps use an entirely different method.)