Choppy market signals

March 21, 2017 01:00 PM

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.

DJ Shanghai Index

The Dow Jones Shanghai Index moved a lot at the beginning of 2017 and hasn’t budged much since, but the CPO is expecting the Chinese stock index to rebound in Q1 of 2017. However, the watch word should be volatility as the CPO expects the index to remain choppy — dipping in Q2 — and rebounding in Q3 before turning lower once again in the second half of the year. The key with this CPO chart is to watch the dailies and look for overbought and oversold conditions to exploit in choppy trade. 

Natural Gas

Natural gas has given back more than half of its post-election gains in the first part of 2017. Though a slight rebound is possible in the latter part of February, the CPO is projecting natural gas to continue and accelerate its sell-off through March. This should set up a significant buying opportunity as the CPO is projecting a major bottom in the gas market to hit in mid-April. The lows should test the $2.50 level and create a base for a rally that could take gas to levels not seen since 2014. Look to be a buyer of natural gas this spring. 

Euro FX

The euro has experienced significant volatility in the last few months as it is digesting the anticipation of the impending Brexit as well as the Trump victory and accompanying currency saber rattling. The CPO anticipates further euro weakness through the spring with the single currency making a significant bottom around May. The CPO suggests a rally should be bought into in early spring, but that the May bottom will be a launching pad for a major rally that could set multi-year highs.

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.