Banks to reverse Trump trade; High vol ahead

July 21, 2017 03:30 PM

The Cycle Projection Oscillator (CPO) is a technical tool that employs proprietary statistical techniques and complex algorithms to filter multiple cycles from historical data, combines them to obtain cyclical information from price data and then gives a graphical representation of their productive behavior. Other proprietary frequency domain techniques then are employed to obtain the cycles embedded in the price.

KBW Nasdaq Bank Index (BKX)
The KBW Bank Index was approaching oversold territory in the CPO in early June and is expecting to rally through June. While there may be a short-term buy opportunity, the CPO is showing that the BKX will make a significant top in later June/early July, which will be followed by a significant sell-off. Any strength in the BKX around or after July 4 may provide a strong shorting opportunity in the index.



10-Year yield
The 10-year Treasury Note yield has been in a slow steady decline in 2017 even since spiking higher after the election. The CPO had predicted a bottom in May followed by a solid rally through June and July. The continued drift in the 10-year yield has put it in oversold territory just as the CPO is expecting an upturn. This is a strong bullish signal (bearish 10-year Note futures) and profit opportunity in 10-year notes. The opportunity may be short term as the CPO is expected to top and reverse in August and back to current levels in the fall. Expect a lot of volatility in rates for the remainder of 2017.

Crude oil
Crude oil is roughly 15% off of its 2017 high close of $54.45 made on Feb. 23, but it has hardly gone in a straight line. There have been five swings of 10% or greater in crude since setting that high. The CPO expects crude oil to continue its slide through mid-August. Traders should look to take advantage of sharp moves and be quick to take profits. Despite the long-term outlook, the daily CPO chart shows a short-term rebound in the midst of its current sell-off, so expect sharp swings to continue.

Silver began a sharp rally in May that carried into June. This rally may provide a great shorting opportunity as the CPO is indicating silver may fall sharply this summer. The sell-off is expected to last into September and take out lows made in December 2016. This is a strong signal and shows silver reversing sharply higher once it runs its course around mid-September, and then rallying for the remainder of 2017.    


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