Registered User
Joined: 10/7/2004
Posts: 43
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A cycle is a pattern that repeats on a somewhat regular basis.. And, as we all know (or should know) the SEC mandated 3 month News/Accounting/Dividend cycle does affect the price movement (either positive or negative) of a company's stock and therefore by extension the various indexes.. The problem in making use of this knowledge is that this cycle is less powerful than the larger trends started, modified or ended by some combination of one or more factors: the economy, interest rates, oil prices, long term outlook, P&L, positive or negative news, exuberance (rational or irrational), rumor, etc., etc. ... Therefore, this cycle is hidden within the more powerful trends.. And, as these trends are driven by the reactions of the "Public" (the market) to a wide verity of stimulus there is usually little consistency to the direction and size of the moves..
I’ve able to isolate and display the News/Accounting/Dividend cycle. I have been using it for a while now and thought that it may help some other users improve their trades
To start with it's no Grail.. Like all indicators it is based on what has happened not on what is going to happen, the result is that what does happen does not always match what our indicators tell us... That said let's proceed..
This indicator is best used on a daily chart, set to zoom 5 (about a 5 month time period).. And, I like it in one of the 2 lower windows, because it is not in the same scale as price.. Therefore, where it is in relation to the price line has no meaning.. What it does is take a 3 day moving average for today and on approximately the same days for each quarter of the prior 5 years and then averages these values.. My choice of 5 years is a result of data limitations (how long some stocks/indexes have been around), not because there is any magic to the number... you should be able to copy and paste the following formula in to the indicator formula window for a custom indicator (there are hard returns at the end of the 1st 2 lines).. Do not check either the price scale or center zero boxes... and I use 1 for the smoothing average...
(avgc3+avgc3.63+avgc3.125+avgc3.188+avgc3.250+avgc3.313+avgc3.375+avgc3.438+
avgc3.500+avgc3.563+avgc3.625+avgc3.688+avgc3.750+avgc3.813+avgc3.875+avgc3.938+
avgc3.1000+avgc3.1063+avgc3.1125+avgc3.1188+avgc3.1250)/21
Once we have the indicator displayed, let's start by looking at some market index's.. Take your pick, because we will see some what the same thing in all most all of them.. Try, zooming out to a zoom 2 (about 15 months) you should see a consistent cycle on a 3 month time frame.. Where the indicator is going in relation to the price line is what we're looking for.. To start with, I have not as yet found a valid use for the slope of the longer trend of the indicator.. I only suggest zooming out so you can see the pattern.. This is why I use the zoom 5 as it displays only one cycle.. (Note there are some Indexes, Media General Groups, Stocks and many ETFs where the indicator does not display because the data does not go back far enough)
Next take a look at the Media General Industry Averages.. Then take a look at your favorite stock or ETF (again if the indicator will not show it's because they have not been around long enough).. You should see some of the same correlations... But, there are some where the cycle will be very weak to invisible because there is not enough News or following or it is over shadowed by other factors, while others will display a very strong and consistent cycle...
Use this indicator to improve your odds on what the market/group/stock is going to do, there is no promise it will - things change and you should always be ready to also... Remember this cycle is the weak sister in relation to other factors that affect the movement of price.. You should never buy or sell based on only this indicator (as is true of most others).. However, after you have already selected a trade candidate taking a quick look at this indicator can be helpful.. I have found that a up trend starting/progressing near or at the bottom of the cycle or during the up moving phase of the cycle will tend to move farther and faster.. While on the other hand a up trend starting/progressing near or at the top or during the down moving phase will tend to move slower and/or to have an overbought bounce or stagnate or fail.. With the opposite being true of down trends..
Regards, Ken
AKA - Sir Tisync
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Registered User
Joined: 10/7/2004
Posts: 799
Location: Duluth, GA
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Very nice concept, Sir Tisync. Here's a small tweak that may or may not assist in the visualization, especially if you are evaluating a group of stocks and looking for those which are in the down-part of the cycle:
Normalize the PCF with a division by the average of all the closes over the sample period, and multiply by 100:
(avgc3+avgc3.63+avgc3.125+avgc3.188+avgc3.250+avgc3.313+avgc3.375+avgc3.438+
avgc3.500+avgc3.563+avgc3.625+avgc3.688+avgc3.750+avgc3.813+avgc3.875+avgc3.938+
avgc3.1000+avgc3.1063+avgc3.1125+avgc3.1188+avgc3.1250)/21/AvgC1253*100
Jim Dean
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Registered User
Joined: 10/7/2004
Posts: 43
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Thanks Jim,
I now have both on my tab. Always welcome ways to improve my "guesses"
Ken
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