Weekly Chart Trading Cycle Overview
The weekly chart (not shown) had a severe decline and looked as though it had made a 20-week cycle bottom.

The daily October sugar chart shows a 20-day trading cycle bottom at A that was also the bottom of the weekly cycle. Prices rose to the trading cycle top at B, then retraced 53% to the probable trading cycle bottom at C.

Trend Analysis
The red and blue lines are the EMA Trend Indicator.

When the red line is below the blue line and the distance between the red and blue is widening the trend is down. When a declining red line turns up it is an indicator that the trend may be reversing. When the red line flattens the market is often beginning a trading range or congestion area.

Buying a market when the red line is below the blue line and the distance between the two lines is widening, as at A means you are trading against the trend and the odds of a successful trade are marginal at best.

But the situation is much more positive at C.

• Prices rose above the blue line, and the red line is flat, indicating a trading range or trend reversal.
• Prices retraced 53% of the move from the cycle bottom at A to the cycle top at B.

Oscillator/Cycle Combinations
However, the RSI3M3 oscillator did not first drop below the buy line at 30 to have an oscillator upturn generate a setup bar and buy signal.

The price bars of the 115-minute chart to the right are each one half of the daily trading session. This time frame will often get you in and out of a market at a better price than the daily chart. A 20-bar cycle in this chart is the same as a 10-day cycle in the daily chart. Notice that a losing buy signal was generated before the cycle bottom at A. This is a relatively common occurrence in all markets as a daily trading cycle is bottoming at the same time as the weekly cycle is bottoming. It is often better to wait for the first trading cycle low after this bottom, which is what we did.

The CCI58 oscillator at the bottom of both charts is an excellent companion oscillator to the RSI3M3 to help identify cycle tops and bottoms as they occur. It is used in our update to the 4-year cycle in the S&P; Index and will be published on the Web site this week. You will be notified by email.

Technical Overview
The technical picture here is excellent for the long side.

• Following the low at A, a one-half daily trading cycle bottom was made at X. Breaking below the AX trend line confirmed B as the top of the daily trading cycle.
• The EMA trend indicator is flat, with the red line trying to rise above the blue line to begin an uptrend.
• The RSI3M3 generated a setup bar the first half of Thursday following the bottom at C. When the high of the setup bar was exceeded it gave 90% odds that the trading cycle had bottomed. Because sugar has a tendency to generate a few more false signals than most other markets we elected to wait for prices to rise above 860, the high of the congestion area, which would be a more solid confirmation of the beginning of an upmove to new highs. It was only 10 points above the high of the setup bar on Thursday, a small price to pay for a more substantial confirmation in this unstable market.

Price Forecast
Our mid-cycle pause price objective for the daily trading cycle indicates a rise to 10 cents is likely as it tops. To calculate the mid-cycle price objective, subtract the price at A from the high at B and add it to the price at C.

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