Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
CATHY WOOD ARK GARBAGE ARK Funds Heading for 90% STOCK CRASH! - 22nd Jan 22
Gold Is the Belle of the Ball. Will Its Dance Turn Bearish? - 22nd Jan 22
Best Neighborhoods to Buy Real Estate in San Diego - 22nd Jan 22
Stock Market January PANIC AI Tech Stocks Buying Opp - Trend Forecast 2022 - 21st Jan 21
How to Get Rich in the MetaVerse - 20th Jan 21
Should you Buy Payment Disruptor Stocks in 2022? - 20th Jan 21
2022 the Year of Smart devices, Electric Vehicles, and AI Startups - 20th Jan 21
Oil Markets More Animated by Geopolitics, Supply, and Demand - 20th Jan 21
WARNING - AI STOCK MARKET CRASH / BEAR SWITCH TRIGGERED! - 19th Jan 22
Fake It Till You Make It: Will Silver’s Motto Work on Gold? - 19th Jan 22
Crude Oil Smashing Stocks - 19th Jan 22
US Stagflation: The Global Risk of 2022 - 19th Jan 22
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Trend a Tale of Three Cycles

Stock-Markets / Cycles Analysis Nov 24, 2009 - 02:57 AM GMT

By: Bob_Clark

Stock-Markets

Best Financial Markets Analysis ArticleHas the market made a major low that will last for years, or are new lows in the cards, lets take a look.


I use cycles as a road map, to do this I apply what I call my theory of relativity, it is based on the premise that there are multiple cycles in effect all the time and each cycle is subservient to the next larger cycle. For example in the chart below I have shown 3 key cycles, the largest being the well know 4 year cycle, the 1 year cycle, and a 4 month (red bars) cycle, there are many more cycles but for today's purposes these will do. Notice how during the past 20 years, the 1 year cycle (blue dots) has not gone below the previous 1 year low unless the dominant 4 year cycle has turned down, in fact on only 2 occasions, one being the drop into the 2002 low and again just recently (red circles), did we see a break of a previous 1 year low at all during the last twenty years!

Simple enough so far, easy money, but wait, there are flies in the ointment that make trading  solely using cycles notoriously difficult, notice that the 4 year's cycle lows are often consistent, this is normally the case, but the highs are more erratic, this is called early, normal or late translation.

Also notice that there is often more than one low formed during each year each can be the  year's low, it can come in early or late, leading one to question, where the heck are we. The thing that really has hair on it, is that a cycle can shift, some say it can skip entirely, but providing it acts like a low and rallies convincingly from it, I usually assume it did come in on schedule, but was of a smaller amplitude than normal, the lows in 1994 and 2006 are excellent examples of this.

1

Looking at the above chart we see the current dynamic, after making a double top, we went down, first breaking though a recent 4 month low and then surpassing all the lows of 2007. So we had broken the previous 1 year low, this showed that the 4 year cycle had turned down. Next we made a low in march of 08 which we can label as a one year low, also notice we made another low 4 months later, which at the time could also be labeled a 1 year low, in fact many analysts were calling for a bottom at that time. 

When that 4 month low was broken, the bottom fell out, we took out the 2002 low, then another 4 month low triggered a bounce, finally we made the low in march of 09, one year from the last low in march of 08, this happened when the 1 year low and the 4 month low both bottomed together (in cycle terms this is called nestling). Everything was fine up until then, a rally was expected from that point, the market was extremely over sold, we had all our ducks lined up and pow, the rally began right on schedule. As you can see from the chart we made an important 4 month cycle low in July, at that point many were seeing a head and shoulders top and expecting a new low, from there we rallied strongly to where we are today. 

Darn, there is hair on it

OK that is all well and good, but what now?  Here is what should happen, if everything goes like clockwork we should top out very soon and then drop sharply for the next 4  months, take out last year's low and make the next 4 year, 1 year and 4 month low in March.

However things have gotten a  little fuzzy, the most obvious problem is that it almost seems impossible to fall that far, that fast, also we have gone up longer than the 1 year cycle should, you see, late in a 4 year down trend, the 1 year cycle should translate or turn early, not go up for eight or nine months (see late 2001-early 02), plus we just made what I believe is 4 month low and are still going up. As a trader, it has been my experience from watching shorter term cycles, that if a cycle shifts, it does it after a larger than normal move, which we have seen.

2 

In the above chart I have shown the 4 month cycle, that has been so tradeable, I believe it just bottomed and is on its way back up, this is very clear on the Transports and the NASDAQ. I have also included potential targets, generated from the head and shoulders pattern and the measured move theory (ABC). Keep in mind that we can turn back down any time, giving an early translation.

A break below the last low would be lights out for this rally, in fact any weakness now will be a negative, after this break of the highs we should bolt up. The question is, when we do turn, can we go to a new low, anything is possible, there are a plethora of fundamental reasons for another panic, but one thing is clear, when this 4 month cycle tops, we could have 3 cycles pulling us back out of orbit, that is providing the 4 year cycle hasn't shifted. For now I continue to pick up nickles in front of the bulldozer,  but I am wearing my running shoes.

To conclude, it is very possible that the huge price drop combined with the enormous reflation  effort, will cause the 4 year cycle to come in early, more important is what I suggest you take from this article, which is how to use shorter term cycles to fine tune your investment timing and more important, protect your capital. Use the map to stay with the trend and never let a bigger cycle roll over on you again, remember it is all relative. 

Next time I will look at the key cycles in gold.

Bob Clark is a professional trader with over twenty years experience, he also provides real time online trading instruction, publishes a daily email trading advisory and maintains a web blog at www.winningtradingtactics.blogspot.com  his email is linesbot@gmail.com.

© 2009 Copyright Bob Clark - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Doug Brown
24 Nov 09, 22:51
Top of this cycle due December 9th 2009

The square in time from the March low will be at 11 degrees of Sagittsrius that will be December 9th 2009. Then wave 3 down will start and the March low will be taken out.

W.D.Gann


Post Comment

Only logged in users are allowed to post comments. Register/ Log in