Tech Talk: Bullish stocks

June 19, 2007 11:42 AM

The March 2003 Futures “Tech Talk” in “Stocks at war” displayed an analysis that clearly projected the Dow Jones Index making a bottom. In fact, the article stated, “We are confident in the model’s current forecast, which projects a major bottom for the Dow in the first half of 2003.”

This analysis was right.

After seeing that price action from March 2003 confirmed that the longer-term trend in the market was up, we published a Tech Talk in the July Market’s article following up on our earlier article to give an indication of the duration of this bullish period. We wrote, “The sizable recovery from the October 2002 low confirms a monthly forecast that called for a bottom last fall and points solidly higher for approximately the next three years.” And the Cycle Projection Oscillator (CPO) monthly analysis of the DJIA indicates a major top is near (see “Dow: then and now,” below).

Now our complex algorithms indicate the multi-year bull move in the stock market may be ending and is supported by our analysis of fundamental factors on the market: housing starts and unemployment. Housing starts indicated strength in October 2004 and then a decline into late 2006. U.S unemployment projections showed a low in unemployment into late 2006 to early 2007. The DJIA monthly analysis is also easy to understand: the 2002 projection indicated a high into late 2006 to early 2007. Looking at the updated analysis of the DJIA you will see that we are nearing a completion of the bull move that started in 2003.

The CPO uses complex algorithms to filter multiple cycles from historical data, combines them and gives a graphical representation of their predictive behavior. The CPO methodology employs proprietary statistical techniques to obtain cyclical information from price data. Other proprietary frequency domain techniques are then employed to obtain the cycles embedded in the price. The CPO goes through an initial detrending filter that is determined by its specific time interval. The de-trending adds considerable computational stability to the analysis.

John Rawlins, trader, analyst, consultant and developer of the CPO can be reached at

About the Author

John Rawlins is a former member of the CBOT with more than 30 years of experience in trading and research. He co-developed the Cycle Projection Oscillator, which has been featured in Futures and numerous research reports, with an aerospace engineer to identify the dominant cycles in a data stream and project them into the future. Reach John at @cpopro1. You can reach John at