SPX Time Cycles - A Teaching Moment
· No noticeable changes in the SPX cycle composite since the last post.
· But let me zoom in for a teaching moment.
· I often repeat to use cycle composite peaks and troughs as approximate turning points and not to infer price levels from the cycle composite amplitudes.
· What makes cycle composites approximate?
· Cycle periods, at least for those cycles considered to be stable and reliable, are fairly accurate; they could vary slowly over time around their stable periods, but that’s a tertiary effect.
· Cycle phases experience continual small phase jitter due to the algorithm constantly trying to determine the optimum phase, but that’s also a small effect.
· The main culprits are the cycle amplitudes. For some cycles, they could vary noticeably over time.
· The cycle detection algorithm estimates the average cycle amplitudes over several cycle periods.
· When amplitudes are constant, the estimates are very accurate, but when they are time-varying, the averag
