Pricing Cycles and Market Movements

Curtis Faith

Prices move in cycles. Unfortunately for traders, these are not pretty sine-wave cycles. Market price patterns don’t repeat in regular form that’s easy to predict. However, the market does exhibit a clear up-and-down movement. The cycles occur because of pauses and changes in momentum. Momentum runs in one direction for a while until it exhausts its fuel; then the market pauses and continues or turns the other way for a while.

Figure 1 depicts a chart of IBM from March 2009 through the beginning of July 2009. I have labeled the points of several short-term daily cycles in order starting with A through J. Notice that although the price of IBM moved steadily higher from late March (labeled A), the ...