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Measurements of Fall Cycles

Since the large breakout we had from the failed pattern in the summer, the markets have been stairstepping higher in a fairly orderly cycle:

So while in an uptrend, there has been a mean-reverting component in the current market structure. During the last pullback, Bill Luby over at Vix and More posted the average pullback since the run started. I thought it would be helpful if we took a look at the average cycle length and move since the beginning of the fall:

Note that these calculations came through eyeballing the chart pre-coffee. Also, the averages do not include the data from the run (7/8-8/7) or the current up move.

Also, the current high from today may change as we are having a ripper of a trend day.

Given this statistically small set of data, I don't think that there are any trading signals to be derived from this. However, if we are to believe that the mean reverting tendency of the market is to continue, then we should expect entering long positions here does not make sense in terms of risk and reward, at least on a swing trade basis.

by Steven Place

Steven Place is the founder and head trader at investingwithoptions.com/