Cyclical inverted sma

Cyclical ISMA: Rediscovering a Powerful Tool for Cycle Analysis
Introduction
In the classic book "The Profit Magic of Stock Transaction Timing", J.M. Hurst introduced the inverse half-span moving average (ISMA) - a powerful but often overlooked tool that, when combined with cycle envelopes, excels at identifying cyclical peaks and troughs in financial markets.
The true power of this indicator lies in its ability to project future price movements through its centering mechanism. While traditional moving averages lag price action, the ISMA's centering logic creates a forward projection equal to half of the calculation period.
I've refined this concept into what I call the "Cyclical ISMA" - a versatile tool for cycle analysis that provides remarkably accurate forecasts when properly implemented.
How It Works
When you center an average, it shifts backward by n periods. This temporal translation creates what appears to be a deficit in recent data. However, this is actually the indicator's strength:

The darker colored section of the indicator represents the projection - our best current estimate of future values
The sharper colored section shows confirmed values of previous projections
The projection window equals half of the calculation period


📊 Recommended Implementation Strategies


1 ️⃣ Multi-Period Cyclical Analysis



One of the most effective approaches is to implement multiple ISMAs with different period settings. I recommend using 2-3 ISMAs (not more) with the following configuration:

Start with the middle of your target cycle (e.g., 180 periods for an annual cycle)
Set each subsequent ISMA to half the period of the previous one (e.g., 180, 90, 45)

This fractal approach delivers early confirmation of cyclical peaks and troughs, effectively reducing the lag window caused by centering. Here's how it works:
Point A might identify a peak on ISMA A (longest period), but the same pattern will appear earlier on ISMA B and even earlier on ISMA C (shortest period). By the time the peak forms on ISMA C, it's already been confirmed, giving you a significant timing advantage.
When combined with cyclical bands, this approach precisely identifies relevant tops and bottoms.


2️ ⃣ Divergence Analysis



For advanced traders, divergence between price and multiple ISMAs provides exceptionally powerful signals:

The price tops highlighted by the green line show that ISMA B has registered a major divergence
ISMA A will eventually confirm this divergence, but requires more time and significant price movement
ISMA C (the fastest) confirms the divergence shortly before a price drop, providing an ideal entry for short positions

What can we deduce from this pattern?

The cyclical bands indicate the annual cycle is slowing down
ISMA A confirms this trend
ISMA B registers an important divergence, signaling the closure of an intermediate cycle (confirmed by the bands and the March low)
ISMA C records a divergence just before the price drop, giving us time to position accordingly

When you observe three aligned divergences while price approaches and gets rejected at the upper bands, it strongly suggests the annual cycle has peaked.
Important Considerations
For proper interpretation of these tools, you must understand both:

The current cyclical position
The structures formed by the cycles

Market conditions aren't always easy to interpret, which is why I recommend using multiple timeframes and complementary indicators depending on market conditions.


📍 Conclusion:

The Cyclical ISMA offers a significant edge in identifying cycle turning points before they become obvious to the majority of market participants. By combining multiple ISMAs with cyclical bands, you can identify high-probability trade setups with precise timing.
I invite you to explore this approach further if you're interested in advanced cyclical analysis techniques.