SPX Futures Update

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ES 20D Cycle Target

  • The late and powerful Friday reversal in ES (SPX futures), anticipated in our Friday morning Premium Newsletter, crossed the 20D FLD and generated a 20D cycle price target, represented by the green rectangle.

  • See further below a lesson on reading and understanding cycle price projections using FLDs. We regularly use this method in our premium newsletters to complement cycle time projections, EWT, and technical analysis.

  • To extend to new highs, ES needs to slice through the resistance area.

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Lesson – Price Projections Using FLDs – How to Read Charts

  • Using Bitcoin as an example, I will explain the cycle-based price projection method we frequently use in our premium service. In cycle literature, the method is referred to as price projections using the forward line of demarcation (FLD). 

    Definitions:

    • Cycle period = time distance between cycle troughs;

    • Forward line of demarcation (FLD) = Price shifted by half the cycle period;

    • Cyan line = median of the price bar;

    • TD = trading day;

    • CD = calendar day;

In this example, the FLD band is constructed by offsetting the median price by TD=7 and TD=8 TDs, which correspond to CD=9 and CD=10 CDs for the nominal 20D cycle that is presumed to vary between 19 and 20 CDs.

H1 is the vertical distance between the last low before the median price intersects with the left FLD band boundary and the intersection point. 

H2 is the vertical distance between the last low before the median price intersects with the right FLD band boundary and the intersection point. 

The lower level of the target range is determined by adding H1 to the left FLD boundary intersection point.

The upper level of the target range is determined by adding H2 to the right FLD boundary intersection point.

This method's price targets are satisfied with an average probability of 0.7 (70% of the time). Still, they could vary by percentage points for different cycle lengths and financial instruments. If one allows for the price not to reach the target range fully but to get close to it, the probability of success increases significantly.

In uptrends, the up targets are reached with a higher probability, and the down targets have a smaller probability. In downtrends, the up targets are reached with a lower probability, and the down targets have a higher probability. 

If a target is not reached, it may indicate a pending price reversal due to one or more longer cycles pressing in the opposite direction.

For cycle periods, one could use Hurst’s nominal cycle periods (you could search for them) or estimated actual cycle periods if you have access to appropriate software and add some +/- tolerance around estimated cycle period lengths. Or follow my posts.

This amazingly powerful method is hard to challenge with any other method I have seen. It yields projection targets similar to price projections obtained by converged CMAs and focal point-based projections. This is unsurprising as both methods are based on cycles and their properties.

I hope this explanation “demystifies” the price targets I have been posting and will help you better understand future posts using this method.

A combination of price and time targets for turning points is a powerful tool that keeps one in the trend as long as possible and anticipates the price and time for reversals. We do this a lot in our premium service. We also supplement cycle methods with standard technical analysis and Elliott Wave analysis, including Fibonacci relationships, for fine determination of targets and possible turning points.

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