# Turning points

A turning point is a point at which the price of an asset reverses direction. Turning points tend to occur at a fixed rhythm in time, such that every X days there is a turning point for that asset. However, whether the price will form a bottom or top is not known in advance, only the timing.

Turning points can be seen in everyday life. One example is in school: every few weeks or months, students will have a test or exam. The direction a student’s grade takes after the exam is not known, but the timing of the exams is. The student’s grade may improve after every single test, or it might decline after every test, or it might improve after some tests and worsen after others.

A turning point is a point at which the price of an asset reverses direction. Turning points tend to occur at a fixed rhythm in time, such that every X days there is a turning point for that asset. However, whether the price will form a bottom or top is not known in advance, only the timing.

Unlike a cycle, which features a fixed sequence of tops and bottoms in a particular recurring order, in the case of a series of turning points, there is no “guarantee” that the next turning point will be one or the other. All we know is that after a fixed period of time, the price will likely reverse direction.

The chart below (courtesy of stockcharts.com) demonstrates a series of turning points occurring in the precious metals market. The turning points occur close to tops and bottoms, not in any particular fixed order, but nevertheless at regular time intervals.

We can get an idea of the reversal direction from the price behavior immediately preceding the turning point: if the price is declining just before the turning point is scheduled to occur, then it will probably form a bottom; and if the price is rising, it will probably form a top.

A series of turning points might be all bottoms, or all tops, or any combination of bottoms and tops. We can see that all cycles are series of turning points, but not all series of turning points are cycles. The defining feature of turning points is that they occur at regular intervals over time. The period between turning points remains constant, even if the reversal direction does not.

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