Amazon, crude, gold & the big equity short

September 20, 2017 11:53 AM

The Cycle Projection Oscillator (CPO) is a technical tool that employs proprietary statistical techniques and complex algorithms to filter multiple cycles from historical data, combines them to obtain cyclical information from price data and then gives a graphical representation of their productive behavior. Other proprietary frequency domain techniques then are employed to obtain the cycles embedded in the price.

Amazon (AMZN) has been a top performer for several years, but the CPO did not capture the correction from its later July high. In fact, the sell-off has put AMZN close to oversold territory in the CPO as it anticipates the market to grind higher into December. This is a good buying opportunity. However, the CPO anticipates Amazon making a significant top at the end of 2017, which should set up an opportunity to short.

Crude oil: After some volatile swings, crude oil has seemed to settle into a range in August. Don’t expect that to last. The CPO is indicating that the early August halting rally should top off around $50 and for crude to head lower into October, though it probably won’t take out the summer lows around $42 per barrel. Any fall sell-off should be seen as a buying opportunity as the CPO expects crude to rally sharply in Q4, challenging the 2017 high. That rally is expected to peter out by year-end and set the stage for a massive sell-off in Q1 of 2018.

Gold started 2017 off with a massive rally that has been followed by three large swings moving the shiny metal between $1,200 per ounce and $1,300 per ounce for most of 2017. The CPO is expecting gold to settle down in a range for the rest of 2017. The CPO indicates that the current short-term rally in gold has a little upside left before it will turn lower in the fall. However, it does not anticipate a major move, so any push to either end of gold’s 2017 range would be an opportunity for a range trade.

S&P 500 (SPX): The CPO has been anticipating a major move lower in all of the stock indexes this summer, but each time this appears to be in the works, equities rebound to new highs. The most recent strength has moved the SPX into overbought territory in the CPO just as it is indicating a sharp move lower. Could the long-anticipated sell-off be on the way? The CPO thinks so, and it could be huge, challenging the November 2016 election lows.

About the Author

John Rawlins is a former member of the CBOT with more than 30 years of experience in trading and research. He co-developed the Cycle Projection Oscillator, which has been featured in Futures and numerous research reports, with an aerospace engineer to identify the dominant cycles in a data stream and project them into the future. Reach John at @cpopro1. You can reach John at