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 predictive behavior. The CPO methodology employs proprietary statistical techniques to obtain cyclical information from price data. Other proprietary frequency domain techniques then are employed to obtain the cycles embedded in the price.
Ever since the post-election rally pushed equities to new highs, business networks have been besides themselves on a “Dow 20,000 watch.” In early 2017 the Dow Jones Industrial Average came within a fraction of a point of that psychological benchmark. Based on the CPO, if the Dow hasn’t reached that level by the time you read this, chances are it won’t for quite some time. The CPO expects the Dow to fluctuate in a range for the first quarter of 2017 before turning lower in the spring and summer. By the July 4 the Dow could be challenging the election night low.
U.S. Dollar Index
While the equity rally and the Dow-20,000-watch has captured our post-election attention, the strength in the
U.S. dollar has been arguably the strongest major market move. But it may have run its course and then some, as the CPO is indicating that the greenback was pushing overbought territory at the beginning of 2017 and was due for a turn. The CPO expects the dollar to experience a sharp downturn in Q1 that could challenge 2016 lows.
The post-election equity exuberance had a corresponding reaction that included a sharp sell-off in gold which challenged the early 2016 low in the shiny metal. However, since mid-December when the equity rally seemed to run out of gas, gold began to rally. That rally is only beginning, according to the CPO. While not particularly steep, the CPO is showing a steady rise in gold for the first half of 2017, with the move peaking in July.