Wynning the future

August 18, 2015 09:00 AM

The Cycle Projection Oscillator (CPO) is a technical tool that uses complex algorithms to filter multiple cycles from historical data, combines them and gives a graphical representation of their productive 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. 

In the CPO charts the green line represents the detrended market price and the red line indicates the CPO projection (the bar charts shown above the CPO show the market’s trading in real-time). Several articles in Futures have highlighted the CPO’s ability to find market turning points. The blue lines below and above the projection line represent a two-sigma move and indicate overbought and oversold territory.

WYNN

Casino and hotel operator Wynn Resorts Ltd. has lost more than 50% of its stock value in less than one year. However, the CPO indicates that Wynn is close to—if it didn’t happen already—hitting a bottom and reversing course. Wynn is up 10% from its June lows as of July 8. The CPO indicates that Wynn will bottom out and begin a fairly significant up cycle by mid to late July. The move could recapture a significant portion of the ground lost during the last year.

WTI Crude oil

The CPO may have been a little tardy on crude oil but indicates the sharp sell-off in early July may be the beginning of longer-term down move. It anticipates continued weakness in crude for nearly the remainder of the year, bottoming out in December. Because the CPO is also indicating that crude is currently oversold, traders may wish to see a little bit of rebound before entering new shorts but the long-term direction in the CPO is definitely lower.

10-year Treasury note (YIELD) 

The CPO is showing that the choppy rebound in the yield on the 10-year note that began in February had topped out in June. What the CPO indicates will follow is continued chop for the rest of the year with no major trend developing.  Here is where traders can take advantage of the overbought/oversold indicators of the CPO. If yields wander too far from current levels a mean reversion trade may be indicated.

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 johnrawlins@msn.com. @cpopro1. You can reach John at johnrawlins@msn.com.