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Chart 2 (below) shows the same 5 cycles from Chart 1 synthesized into one cycle. That means that
Techsignal™ added all the data points of these 5 cycles and created one “synthesized” cycle. What seems
more apparent from this synthesized cycle plot than from the first chart of individual cycles, is the cyclic
expectation for a rally from a May low into the August/September time frame, before a sharp drop into early
2007. But before you jump to conclusions about this rally, you might want to look at a still larger 208 week
cycle shown in Chart 4, and then at its impact shown in chart 6 after it has been added into the synthesis.
Another important point from this chart is that you have to be careful to not rely solely on a synthesized
plot amplitude as an indication for the future strength or weakness of a price move, though the correlation
is often quite good. For example, this chart 2 shows a large cyclic drop into early 2007; chart 1 helps you
understand that outlook by showing you a nest of several individual cycles bottoming in that time frame.
You must also be aware that there can be a larger cycle, or one larger than you have plotted, that is
dominant in a particular time frame and influencing the expression of smaller cycles you are seeing, by
sometimes almost eliminating the impact of the smaller cycles. We saw that situation in the 9/11 market
in September, 2001 when several smaller cycles, suggesting at least a potential for rally, were simply
overrun by larger cycles.
This chart also shows that the cycle plot line does have to not overlap the price action, and the cycle can
have highs or lows out of scale with the price movement because the cycle plot is not normalized to do
that. What you can readily pick up, however, is how well the recent cycle plot trend matches up with price
action. Does the cycle plot in general tend to match up with recent price highs and lows, and trend into
those highs and lows? If so, your confidence grows in the plot’s future expectations.
Chart 2
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