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.
McDonald's has been on a tear since the election and has entered hyper drive this spring, rallying more than 20% in the second quarter alone. This pushed the world’s most famous fast food restaurant into overbought territory in the CPO. This creates a good selling opportunity as the CPO expects McDonalds to correct in the third quarter. This could be a significant move given how far the stock has gained in 2017. However, the CPO expects MCD to make a bottom in the fall, and turn back up. A correction could be an opportunity to get long come fall.
The recent sell-off in live cattle futures has pushed it into oversold territory. While this may be an opportunity to get long as we enter grilling season, the CPO expects cattle to trade in a range until September, when it is calling for a strong sell-off. Once cattle futures recover from Q2 weakness and moves out of oversold territory, there will be a strong opportunity to short in the fall.
Dow Jones Average
The CPO has predicted weakness in the Dow during the last few months, which showed promise before the market girded itself to make new highs. The long-term outlook has been weak and the recent strength in the Dow has pushed it near overbought territory. The CPO shows the Dow close to a major turning point that could be more dramatic than the crash that occurred during the Great Recession. This sell-off is expected to last an entire year with no bottom in sight until the summer of 2018.
WTI crude oil has been chopping around between $40 and $55 in 2017 since making a major double bottom below $30 in early 2016. Despite these whipsaws the CPO expects crude to remain relatively stable into the fall. At that point it expects crude to have a solid rally lasting until around Thanksgiving before once again turning lower. December highs could be sold going into an early 2018 sell-off that could challenge the 2016 lows.