J.M. Hurst's Time Translation Theory: Mastering Market Cycles and Predicting Peaks and Lows

Understanding Peaks and Lows in the Stock Market.

Stock markets are constantly moving, creating peaks (high points) and lows (low points).

These movements can seem random, but they often follow patterns influenced by various factors.

 Understanding how these peaks and lows form can help traders and investors make better decisions.

the Hurst’s time transation theory is very hepful to identify how the peaks and lows form.

The stock market moves in cycles, consisting of periods of rising prices (bull markets) and falling prices (bear markets).

Within these broader trends, smaller cycles or waves also occur.

This is why the major peaks are round, because the lower time frame peaks occurred in rotation, contrary to the low formation which are sharp, du to panic selling pressure.

PEAKS AND LOWS FORMATION

In the Anatomy of cycles I already detailed the different market phases, for more details, on the different phases click on the link.

In the following article I would like to explain a J.M.Hurst very important concept which explain in details how and why, the peaks and low formed and their consequences.

The time translation theory concept, is a very complex topic in technical analysis and market cycles theory, but essential to successfully trade the cycles.

For this reason I will develop in 14 different points the concept.

J.M. Hurst’s Cyclic Theory is a comprehensive approach to market analysis based on the idea that price movements are composed of multiple cycles of different lengths.

One of the key concepts of J.M.Hurst theory is time translation, crucial concept for understanding how peaks and lows form in financial markets.

The time translation theory, in Hurst’s context, refers to the phenomenon where cycle peaks and troughs of different degrees (or time frames) align to create significant market turning points.

This concept is based on the idea that market cycles are not perfectly synchronized, but rather shift or “translate” in time relative to each other.

Here’s a more detailed breakdown of this concept :

1. Cycle Harmonics:

Hurst’s theory of time translation is built upon the foundation of cycle harmonics. This concept suppose that market movements are not random but composed of multiple overlapping cycles, each with its own frequency.

These cycles range from very short-term (such as 5-day or 10-day cycles) to extremely long-term (like 18-year or even longer cycles).

The harmonics of these cycles create the complex price patterns we observe in financial markets.

Time translation becomes crucial in understanding how these various cycles interact and influence each other across different time frames.

2. Cycle Interaction:

The interaction of cycles is where time translation becomes particularly important.

As cycles of different lengths overlap, they can either amplify or diminish each other’s effects on price movement.

For example, when a short-term cycle aligns with a medium-term cycle in an upward phase, it can create a stronger bullish movement. Conversely, when cycles are out of phase, they may counteract each other, leading to more sideways or choppy price action.

Time translation helps explain why these interactions don’t always occur at predictable, fixed intervals.

3. Time Translation Concept:

The core idea of time translation theory is that cycles don’t always peak or trough simultaneously.

Instead, there’s often a time lag or “translation” between cycles of different degrees.

This concept is crucial for understanding market behavior because it explains why market turning points don’t always occur exactly when simple cycle theory might predict.

Time translation accounts for the dynamic, fluid nature of market cycles and their interactions.

4. Peak and Low Formation:

In Hurst’s theory, significant market peaks or lows tend to form when multiple cycles across different time frames align or come close to aligning.

However, due to time translation, this alignment is not perfect.

The slight misalignments caused by time translation can lead to more complex market structures, such as double tops or bottoms, or extended consolidation periods.

Understanding the time translation theory is key to anticipating these formations and their potential significance.

5. Nominal vs. Translated Time:

Hurst made an important distinction between “nominal time” and “translated time.”

Nominal time refers to the idealized, perfectly regular cycle that would occur if all cycles were in perfect harmony.

Translated time, on the other hand, accounts for the shifts in cycle timing due to time translation.

This distinction is crucial for practical market analysis, as it helps analysts reconcile theoretical cycle models with observed market behavior.

6. Left and Right Translation:

The concept of left and right translation is a key aspect of time translation theory.

Cycles can be “left-translated” (peaking earlier than expected) or “right-translated” (peaking later than expected).

This phenomenon helps explain why market turning points don’t always occur exactly when predicted by idealized cycle theories.

Left translation:

 Often indicates a weak momentum in the direction of the primary trend, while right translation may suggest strong momentum.

Knowing if the peak is a left or right translation is crucial to anticipate the next correction

Depending the period of the cycle the correction will be less or more powerful.

A 10 days cycle left translate will have a small impact on the 10 days cycle correction.

A 20 weeks or 18 months cycle having a left translate peak, will have a greater influence on the next correction.

The left translate peak will always predict a sharper decline or correction then the right translate peak.

By knowing if the peak is translate on the right or on the left side of the cycle help the trader to position himself for the next correction

The right translation.

When the peak occur on the right part of the cycle, or right translation, we can expect a mild correction.

This occur usually when many cycles are on the up phase at the same time, pushing the market strongly up due to the strong momentum.

Because the market is strongly on the up phase, the shorter time cycles correction will have less influence. 

On the following 40 days cycle, on the bitcoins market chart, the green dashed line represent the right time translation, we can see the size of the following correction and the red dashed ine have a left time transation, is follow by a sharp correction. 

On the SP500 monthly chart, for the 18 months cycle, the 4818.62 high formed on the left side of the cycle, a sharp correction follow.

On the SP500 20 week’s cycle, the red dashed line show the left time translation and the green the right time translation, we can see the difference of the correction size.