Introduction to JM Hurst Cycles Analysis Methods
An Introduction to JM Hurst Cycles Analysis Methods. Article submitted by Christopher Grafton, Author of Mastering Hurst Cycle Analysis.
Cycles in Sentiment
Most of us understand that cycles are part of the fabric of life and the world we live in. Seasons come and go, night follows day, the tide rises and falls. The way we perceive opportunity is also cyclical. Feelings of optimism have to start somewhere, however tentatively. As these feelings take hold, especially among large, interacting groups of people, they feed on what went before and grow.
They continue to grow until things appear to be as good as they can get and at that point, they are. Ebullience then gives way to a sense of reality, which gives way to the first inklings of doubt, which in turn become feelings of pessimism and eventually despair. Then, when things look like they are as bad as they can be, they are and at the point the cycle starts up again.
This simplified view of the mood of the crowd, the essence of contrarian investing, is our starting point. Prices in freely traded financial instruments progress in cycles of sentiment and market action, rather than being a random distribution of independent prices, is governed by underlying form.
At any one time there is a multiplicity of different sentiment cycles operating together. For example, it is quite possible for a long term investor to be negative on the market, but at the same time for s short term trader to be positive. A raging bull market to a day trader will just be noise to a pension fund manager. It is all a question of which cycles are under observation.
Mastering Hurst Cycle Analysis
A modern treatment of JM Hurst's original system of financial market analysis
By Christopher Grafton
Published: 30 Nov 2011