If you use just plain sine waves, you do have a problem with knowing whether it is a top or bottom, because traditional cycle analysis using these sine waves can only tell you the that it is a turning point, but not the direction of change. Those nest of sine waves you see in my XJO chart belong to that category. You do NOT know whether it is a top or bottom.
BUT:
If you use the cycle sum charts, or decomposed cycle charts of varying periods as shown in my morning's post, there is no such confusion of whether the turning point is a top or bottom. These cycle sum and cycle charts will indicate whether it is a top or bottom directly from its placement in the chart - if it is bending down from the top, then it shows a peak and if it is bending up from the bottom, then it is a trough. In other words, cycle sum and decomposed cycle charts as posted can indicate the direction, but not the quantum or magnitude of the change.( Warning: Not all types of decomposed cycles can be used to indicate the peak or trough. Using Hurst cycles will indicate the peaks and troughs. So please find out what technique was used to decompose or to generate the cycles )
That is why to measure the quantum or magnitude of change, it is needful to draw the Hurst envelopes ( those who do not know what are Hurst envelopes, please refer to the book, "Magic of Stock Market Transaction Timing" by J M Hurst (obtainable from amazon.com or Barnes and NObles ) to get an estimation of the move to the edge bands.
Not all stocks in the ASX are amenable for cycle analysis. Many stocks in ASX are NOT suitable for cycle analysis. If you want to use cycle analysis on ASX stocks or Indices such as XJO, e-mini etc it is best to perform correlation analysis ( this involves a backtest, forward test and paper trading [optional] ) first to see whether the stock or index carries a high level of correlation to the cycle sum or whatever cycle. But once it is determined that the stock has a high degree of correlation with the cycle projection, there is a high degree of confidence to use the projection. A correlation test is performed again within 6 months or when the projection shows signs of decay ie correlation getting lost or the trading signals are less correlated.
The cycles are always performed on EOD ( end of day data ) and never intraday, so there is no difficulty at all in picking the major turning points unlike your presumption that there is such difficulty. A trader will probably trade the left half cycle as he rides the cycle upwards from the trough to the peak- holding the stock between the two dates as a swing trader.
The 3 problems you mentioned do not arise when you use the Cycle sums and decomposed cycle charts.
They only exists and do become serious problems if you use the traditional sine waves. So I suppose those who use them for trading are the ones in the best position to answer your 3 questions.
I would suggest that a trader should only use whatever methods or tools that he is familar with or comfortable with. If cycles is somewhat harder to accept, why not just skip it and continue to use those tools and techniques that can bring in profitable trades? I have know many index traders merely trade on price and volume and trendlines and are very profitable. If cycles are seen to be complex and confusing, then the trader should continue to use whatever works for him, keeping things simple.
(20min delay)