Market Cycle Aggregate

Having vigorously studied technical analysis, I have spent too many hours to count pouring over books, methodologies and techniques the the science/art.

After viewing Raoul Pal’s video on predicting the global economy on RealVision TV, I’ve decided to return to cycle analysis to combine my technical analysis skills with his economic framework.

In the video he discusses his trading framework, using a top-down approach of global trends, covering timeframes from decades, to year and months. This resonates with me as this is very similar to the original methods I was taught, only here it is not assuming cycles are of a fixed period.

Cycle Aggregate = Copper + SP500 + US10yr + WTI + Lumber / 5

– Using the aggregate, there are fewer occasions where it moves in the opposite direction to the PMI
– On the occasions it does move in the opposite direction, they are relatively short in timing
– The three peaks on PMI since 2004 are losing momentum (each swing higher is of less magnitude)
– On the data available, the aggregate has been within its longest period of contraction. It is also the longest period that the spread between the two has been so far apart. This suggests that the upswing in the PMI read is less likely to break the prior swing highs