What is represented by cycle inversion?

Cycle inversion refers to a phenomenon in technical analysis where the expected pattern of market cycles is counterintuitive. In this context, it involves the appearance of a swing high at an unusual cycle low. This suggests that instead of following the typical pattern where low points (lows) precede high points (highs) in a clearly defined cycle, the market produces a high when it is expected to be at a low. This can signal a potential shift in market sentiment or trend, indicating an abnormality that may precede a trend reversal or an unexpected turn in price movement.

Understanding cycle inversion is crucial for technicians, as it may highlight moments when psychological factors or unexpected market news influence prices, resulting in deviations from typical cycle behavior. Recognizing such anomalies can provide critical insights for traders seeking to navigate volatile markets and capitalize on emerging opportunities.