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

Has the Long-term Kress Cycle Bottomed Early?

Stock-Markets / Cycles Analysis Dec 12, 2013 - 05:24 AM GMT

By: Clif_Droke

Stock-Markets

A reader asks, "I was wondering if it's possible that the long cycles, such as the 60-year cycle, have already bottomed early. Is that even a possibility within the scope of the cycles? It appears that the Fed has complete control of the markets right now. One cannot help but wonder how high they will drive the stock market, and how low they will drive the gold miners. It would seem that the imbalances are beginning to look a little conspicuous."


This is a question many investors are asking themselves right now, so let's delve into it.

It's important to note that the 60-year cycle that was referenced above is "fixed" as opposed to dynamic. This means that its bottom is absolute and can't be moved beyond its standard deviation of roughly 1-2 months. Therefore it hasn't bottomed yet and won't bottom until later next year, as per the norm of a yearly Kress cycle.

Now is it possible that the Fed's extraordinary stimulus efforts in recent years have mitigated the cycle? Yes it is. Historically the last 60-year bottom of 1954 saw a similar situation wherein the Great Depression of the preceding decades - and the U.S. government's response to it (namely war-time spending) - essentially ended the depression/bear market a few years before it normally would have ended under the Kress cycles.

It would be quite a stretch to assert the Fed has complete control of the market. Yes, it does exercise a rather large degree of control over equities through QE, but when you consider how historically "oversold" the market was in the wake of the 2008 crash the subsequent rally isn't surprising. A greater feat would be if the Fed could prevent another market "melt-up" from occurring. It's doubtful the central bank has the prescience to do this, so we may yet see a final sell-off before the 60-year cycle bottoms next year.

Just how bad is the economy?

A common refrain heard among pundits is that the Fed's QE stimulus program has done little, if anything, to boost the economy.

No one denies the extent to which QE has sent stock prices soaring in the last five years, yet in that same amount of time the domestic economy has made but scant progress. Or so goes the cliché. There is good reason for believing, however, that the economy has seen more internal improvement than critics would like to admit.

So just how much as QE helped the economy? A recent report by the McKinsey Global Institute, as mentioned in the Momentum Strategies Report, estimated that "unconventional monetary policies" such as asset purchases and low interest rates have reduced the unemployment rate by at least 1 percent and have prevented a deflationary spiral in the U.S.

Consumer confidence, while certainly below the high levels of the pre-crisis years, has come a long way since the depths of 2009. It reflects a steady improvement in how consumers perceive their own economic prospects and is a testament of recovery.

Consumer Confidence

Another clear testament of economic recovery is the New Economy Index (NEI), a reflection of the real-time state of the U.S. retail economy. NEI recently hit a new all-time high and continues trending higher. As long-time readers of this column are aware, until NEI confirms a "sell" signal the overall trend of retail spending is considered to be up. The last time NEI gave a "sell" signal was in early 2010, which proved to be a temporary blip in the long-term recover that started in 2009.

New Economy Index

There are many who wonder why, with untold billions in stimulus money, the economy hasn't recovered more than it has by now. There are three answers to this; the first answer is that given the severity of the 2008 credit crash it was only natural that recovery would be prolonged. After all, the previous Great Depression in the 1930s took over a decade to get the economy moving again. This time around the unprecedented scope and pace of the Fed's stimulus shortened the depth of the recession and improved the recovery time.

The second answer is that the 60year/120-year Kress cycle has been in its final "hard down" phase for the last few years. This has created a deflationary undercurrent in the U.S. economy; it partly explains why the Fed can get away with creating so much money every month without it leading to massive inflation, as it would normally.

A third and more revealing answer is that the consumer spending component of the recovery has actually done better than the statistics suggest. Raymond James economist Jeffrey Saut discussed this in a recent commentary, noting that "the majority of [consumer] transactions are taking place for cash, where sales are not as readily captured in the surface figure as are credit-card purchases. Indeed, not only are the foreigners transacting in cash, but many Americans are doing the same after having been burned by debt in the 2008-09 credit crisis." Saut's conclusion is that the economy is stronger than most believe.

This isn't the complete story, however. Most of the increased spending and subsequent economic strength is courtesy of upper-middle class and wealthy consumers. The middle class still hasn't fully recovered from the Great Recession, and there is some evidence that segments of the middle class are still experiencing something akin to a recession. The way a recovery normally progresses is that the wealthier segments of the population are the first to emerge from an economic contraction with increased spending. Then the classes beneath them slowly start spending again as the job market improves and with it their fortunes. It's clear that the U.S. middle class has yet to fully participate in the recovery, but their participation should be evident by 2015 once the deflationary undercurrents of the Kress cycle have been dissipated.

Kress Cycles

Cycle analysis is essential to successful long-term financial planning. While stock selection begins with fundamental analysis and technical analysis is crucial for short-term market timing, cycles provide the context for the market's intermediate- and longer-term trends.

While cycles are important, having the right set of cycles is absolutely critical to an investor's success. They can make all the difference between a winning year and a losing one. One of the best cycle methods for capturing stock market turning points is the set of weekly and yearly rhythms known as the Kress cycles. This series of weekly cycles has been used with excellent long-term results for over 20 years after having been perfected by the late Samuel J. Kress.

In my latest book "Kress Cycles," the third and final installment in the series, I explain the weekly cycles which are paramount to understanding Kress cycle methodology. Never before have the weekly cycles been revealed which Mr. Kress himself used to great effect in trading the SPX and OEX. If you have ever wanted to learn the Kress cycles in their entirety, now is your chance. The book is now available for sale at:

http://www.clifdroke.com/books/kresscycles.html

Order today to receive your autographed copy along with a free booklet on the best strategies for momentum trading. Also receive a FREE 1-month trial subscription to the Momentum Strategies Report newsletter.

By Clif Droke

www.clifdroke.com

Clif Droke is the editor of the daily Gold & Silver Stock Report. Published daily since 2002, the report provides forecasts and analysis of the leading gold, silver, uranium and energy stocks from a short-term technical standpoint. He is also the author of numerous books, including 'How to Read Chart Patterns for Greater Profits.' For more information visit www.clifdroke.com

Clif Droke Archive

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


Post Comment

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