Cycle "Translation"

You will often hear reference to a cycle's "translation". This refers to the fact that cycles rarely crest in the exact center between troughs. More often they will crest to the right of center, called a "right translation" cycle, or to the left of center, called a "left translation" cycle. (This has to be something an engineer dreamed up. Wouldn't it be easier to say the cycle "leans" to the right or left? Maybe not, because then everybody would know what it means.)

In a bull market the market spends more time going up than down, so we will normally expect major cycles to crest toward the end of the cycle, with the crest being followed by the down phase of the cycle -- a right translation. Note in the illustration below that a right translation also means that the cycle trough after the crest will normally be higher than the trough at the beginning of the cycle.

In a bear market we would expect to see left translation cycles with cycle patterns exactly the opposite of those in a bull market.

Rules Regarding Cycles

Rule 1: Price movement is a manifestation of cycle forces, not the cycle force itself. When we refer to a cycle, we are technically referring to an invisible psychological force driving the price moves we can observe on the chart, but we will most often describe the cycle in terms of price movement because that is where we can normally see the cycle force at work; however, there are times when the evidence of cycle movement will be easier to spot by reference to an internal indicator.

Rule 2: A cycle low is not always found at the price low for the cycle. This is just an extension of Rule 1, and it is a reminder that we are primarily trying to identify the point at which cycle forces change directions and begin moving upward into the next cycle. We will use various methods to do this, so remember not to get confused when the price low and the cycle low are miles apart.

Rule 3: Cycles can expand and contract at will. We project cycle lows based on averages, but we always have to be alert for changes in the expected length. The variability of cycle length can be so extreme that the number of subordinate cycles within a greater cycle can change. For example we might find three 10-Week Cycles within a 20-Week Cycle.

Rule 4: A cycle of greater magnitude will truncate the length of subordinate cycles. The best example of this is the two 20-Week Cycles within the 9-Month Cycle. The phase one 20-Week is usually longer than the phase two 20-Week, which is normally shortened by a 9-Month Cycle making its lows on time. In other words, a 9-Month Cycle does not expand to accommodate a lengthening 20-Week Cycle.

Rule 5: Cycle length is a "nominal" identification based on averages. If you do the math, you will find that there are 5.3 9-Month Cycles within each 4-Year Cycle, yet we only depict 5 because it is simpler to work with the averages.

<< Go BACK        Click Here to CONTINUE >>