GBPSEK - in long cycle peak zone: downside resolution preferred view.

Jan 12, 2023

Link to guidance notes for Hurst cycles terminology: FLD, VTL, Translation, Diamonds, Circles/Whiskers etc.  Peak and trough zones are colour coded according to cycle magnitude in Hurst's nominal model.  

We focus on a specific set of cycles in the notes, by wavelength:  Long, 54 month and 18 month; Intermediate: 40 week, 20 week and 80 day; Short, 40 day and 20 day.  The longer the cycle, the more significant the peak or trough and theoretically the stronger the move into and out of it.  

Longer view - price is in a 40 week cycle peak zone, which has bearish implications.

The 18 month cycle peak line is regular and clear and points to a peak in this cycle later in the year or even early 2024.  This means that the underlying longer trend is still up.   However, the 18 month cycle consists of two 40 week cycles and price is in a 40 week peak zone right now.  This points to a downside resolution near term, with a trough due in April, probably early April at that.  The takeaway therefore is: the juice isn't worth the squeeze for a meaningful upside call and a decent downside swing is more likely at this stage.

Shorter view - the 40 day is the cycle of interest and it may have just peaked.  The next trough is lower circa the first week February.

The daily chart analysis shows the 40 week cycle peak zone clearly and a tight cluster of shorter cycle peaks, from the dark green 20 week cycle down to the purple 20 day cycle.  And its all due now.

Price may have just tapped out at the blue down-sloping valid trendline (VTL) associated with the 40 day cycle.  A break of roughly 12.6 confirms the 40 day peak and the next trough is due in the first week of February.  Bear in mind also that a 20 week cycle trough is due at the end of March and this should act as a downside magnet for rallies going forward.

Christopher Grafton CMT

Chris has been involved in the markets for 20 years. He is the author of Mastering Hurst Cycle Analysis and is an experienced working technician. Chris holds the CMT qualification.