Financial Markets Macro/Micro View: Waves and Cycles
Stock-Markets / Cycles Analysis Sep 17, 2018 - 10:01 AM GMTBy: Brad_Gudgeon
That which has been is what will be,
That which is done is what will be done,
And there is nothing new under the sun. Ecclesiastes 1:9 (NKJV)
Much has been written regarding repeating socio/political economic (SPE) cycles. Strauss and Howe wrote about the 20-22 year generational turns, which work in a 4 generation cycle called a Saeculum. Each Saeculum lasts about 80-88 years and includes a repeating pattern of Winter, Spring, Summer and Fall back to Winter again.
R.N. Elliot, A.J. Frost and Robert Prechter (over time) were able to map out an Elliott “Grand Super Cycle” 5 Wave pattern stretching from the founding of the USA into about 1999-2000. W.D. Gann was able to see repeating cycle patterns of 90, 82-84, 60, 45, 30, 20 and 10 years. There are many other cycles like the 4-year presidential cycle and Benner’s Cycle (http://bit.ly/2Qzx4OQ) which I will get to in time.
In this section, (Section 1) I’m going to look at the SPE picture starting with the British Financial Panic of 1772 to the present. At the end of each section, going forward, I will also look at the current micro picture in stocks and the precious metals.
The 1772 panic sowed the seeds of the American Revolution and the forming of the United States of America. This is where I see the beginning of the 4 generation cycle as it pertains to America (It is interesting to note in light of the repeating 80-88 [average 84 years] year cycle there is also Uranian/Taurean [U/T] cycle [when the planet Uranus enters into the sign of Taurus for a general 8-9 year period every 83/84 years, which also matches Gann’s 82-84 year cycle and the Saeculum]).
Prechter was able to map out a general 5 wave sequence from the 1780’s until 1999-2000 (see pages 92-93 http://bit.ly/2p8RnpY). I pretty much agree with Prechter that the final 5th wave ended in 2000 (actually 1999; also of note, Elliott thought that the final 5th wave began in 1942 instead of 1932, which would have placed us in the final 5th wave of V since 2009; I kept Elliott’s count as a preferred wave count until this last wave unfolded due to cycle wave 4 of SC Wave V, the crash of 1987, terminating E-Wave-Wise at the Bosky low of Nov. 1988 in an irregular bottom instead of Oct/Dec 1987. This is where the extended Cycle Wave 5 actually began. Elliott thought that Grand Super Cycle Wave IV from 1928 (1929 was an irregular top, so was 2000) ending in an irregular bottom in 1942; Prechter dismissed this notion).
If one starts in 1932, Super Cycle Wave I of Grand Super Cycle Wave (V) clearly terminates in 1937, with 1942 being SC II’s terminus. SC Wave III ran from 1942 to 1966 and had a clearly defined 3rd of a 3rd five wave sequence (or 9 waves total), which is common in third waves. Wave IV ended as an expanding flat (Elliott’s Rule of Alternation works here as Waves 2 and 4 are distinctly different: wave 2 was a zig zag and wave 4 was a flat) in late 1974, which launched the final SC Wave V of (V) into 1999. SC Wave III was 24-years long and SC Wave V was 25-years long, which agrees with Elliott’s Equality of Waves principle in which 2 up waves in a 5 wave sequence tend to equal each in other in time, price or both.
The final Cycle Wave 5 of V of (V) should have terminated in 1990, as Cycle Wave 5, equaled Cycle Wave 1 at that point. The extension began in 1990 at the terminus of primary wave 2 in Oct 1990, up into 1998 to primary wave 3, primary wave 4 into Oct 1998 and the final primary wave 5 in 1999. This extension was caused no doubt by the Baby Boomer Generation and their spending wave (Harry Dent Jr.).
Since the 1980’s, I have been mapping the wave sequences down to the smallest sub-waves and found 5 wave sequences within 5 wave sequences that were clearly and easily identifiable until 1999. Since 1999, the true 5 wave sequences have disappeared altogether! This has startling implications going forward if Elliott’s rule of Double Retracements of 5th wave extensions of 5th waves (more later).
Getting back to the U/T cycle (which is virtually identical to the Saeculum), I understand that this cycle (before the start of the American Revolution of 1775 and the Panic of 1772) began in 1767 and ended in 1775, the exact start of the Revolution in the colonies. This same U/T cycle occurred again from 1850-59. There was a financial panic that began in 1854, ending in 1857 (terminus of Grand Super Cycle Wave II, GSC Wave I ended in 1837). The American Civil War oddly started 2 years after the end of the U/T cycle, whereas the American Revolution and WWII began near the exact end of the U/T cycle.
The next U/T Cycle began in 1934 and ended in 1942. WWII began in Dec 1941 almost perfectly at the end of the U/T cycle. The next U/T period is one that we have just entered 2018-2026! To complicate things, Gann’s 90 year cycle top is due around 2020/21 (1837 top to 1929 = 92 years, 1929 +92 = 2021). Gann’s 20 year cycle top is due in 2020.
The Jacksonian politically caused 90-year bust cycle of 1837-42 (caused by the Rothschild bankers, E-Wave notation “a” or “x” of GSC II) plus the crash of 1929/32 makes it due to bottom again as a cycle around 2022, 1 year past the ideal Benner’s Cycle low (the last Benner’s Cycle was due in 2011 and came 2 years early). Ideally then, we should have about 1 to 2-years before the top occurs.
What made the depression of 1837-42 (“a” of GSC II), and 1929-32 (GSC Wave IV) come together in severity was the 90 year cycle. The U/T cycle did not enter into the equation again after the Revolution until wave “c” of GSC II ended in 1857. The U/T Cycle ended GSC Wave II (followed by the Civil War) and the other U/T Cycle ended SC Wave II of GSC (V) in 1942 (with WWII already raging), each a crisis war for the USA according to Strauss and Howe. The next crisis war is due ideally around 2025/26!
Then, we also have the repeating revolutionary cycle of 250-252 years suggesting a panic low around 2022/24 and a crisis war around 2025/26. The 7-year Shemitah Cycle is due around 2022/23, last seen 2015/16, then 2008/09, then 2001/2002 before that. The Shemitah Cycle typically either arrives in the year (or sometimes 2 years) before the stock market low or on the exact year of the low. 1980-82 saw 2 recessions. 1987 was a direct hit and 1994 was a bond debacle and the bottom before the huge rise into year 2000. 1973-74 was the Arab Oil embargo, which ended SC Wave 4 of GSC (V).
1966-67 was a credit crunch and a drop in the stock market, 1959-61 saw a recession from 1960-61. 1952-54 saw the end of the Korean War and FED tightening due to inflation and a recession. 1945 saw a recession due to spending decreasing as the war was winding up. 1937-38 saw the double dip depression and “a” of SC Wave 2 of GSC Wave (V). 1931-33 saw the final drop into the crash low of 1932 and the end of the first phase (1933) of the Great Depression of the 1930’s.
1924 ended the recession of 1923-24. 1917 saw the entrance of the US into WWI, which ended in recession in 1919. 1910-12 saw a financial panic. 1903 saw the recession of 1902-04.
You can see, cycles generally worked differently years ago than they do now. If the Shemitah cycle works like it did in the past we should see a stock market top due no later than 2020/22, and a bottom somewhere around 2022/24. If it works like it did in the past 3 cycles, then we should see a top around 2020/21 and a low around 2022/23.
Benner’s Cycle doesn’t deviate by more than 2.5 years making early 2024 the latest we should see a stock market low. The gold/silver cycle runs 7-8 years making late 2022 to late 2023 the next likely bottom for precious metals (sorry gold and silver bugs), which should align to near the coming low in the stock market. My best guess is we see a top in 2020 or 2021, and the worst of the drop should occur later in 2022 or 2023. This is pure speculation though.
The 3 U/T cycles run about 251 years and 36 Shemitah cycles run 252 years, which is close to the Revolution Cycle of 250 years. The average generation cycle runs 21 years, and 84 for the saeculum. 3 saeculums run about 252 years. Everything points to major low around 2023 .
The problem with identifying the timing of the crash is not as much of a concern to me as the possible severity of the coming crash itself based on both fundamental, cycle and Elliott Wave analysis. What I’m seeing, (based on past cycles, Elliott Wave and fundamental analysis) tells me that we may very well see the worst crash in our history. Elliott’s Rule of double retracements of 5th wave extensions of 5th waves tells me that the next low should go down to the Oct 1990 low under SPX 300 (where the 5th wave extension began).
The 2002 (Dot.com low) and 2009 (mortgage crisis low) bottoms failed to do this, instead created a very bullish xyz (abc) flat which launched a non 5 wave impulsive wave, which means that it is likely part of an E-Wave bear pattern that follows a GSC (V) Wave sequence (1770’s/80’s to 1999).
This scenario creates a larger bullish XYZ pattern, which should be a larger WAVE X which means a huge wave up to WAVE Y to follow. I can’t imagine what all this implies, but another collapse harder than this one (which I believe we are going to see in the 2020’s) is possibly implied in the 2040’s. With the USA losing its reserve currency status in the world, I might attempt to conjecture that the next wave up will be caused by HUGE inflation and a commodity boom. This next inflation wave is due to crest around 2038-42. There are already signs we are going into another mini ice age that will last until around 2051 (more on this in Section 2) and in the past this type of weather condition has caused famines, diseases and more wars.
If I’m wrong and GSC Wave (IV) ended in 1942, and 1999-2009 was SC Wave (IV), why does this wave since 2009 have no real 5 wave internal sequences? If this is SC Wave V we are in, then 1966-74 and 1999-2009 would have to be SC Waves II and IV respectfully. SC’s Waves II and IV should have alternated more than they did I would think, but they didn’t.
Could this current wave up since 2009 be an aberration caused by central bank interference and really be SC Wave V? The waves of GSC (I) and (III) were not so cut and dried as far as a 5 wave sequence until the 1920’s. It took massive liquidity and public participation to properly measure the quantitative E-waves of fear and greed, in my opinion. Gold has been rallying in ABC type rallies since 1969. Small, low cap stocks with low public participation tend to rally in abc type waves, I have noticed.
If we can say Wave (I) began in 1772 then it lasted 65 years or so to complete. Wave (III) clearly lasted 71-72 years. If Wave (V) began in 1932 and ended in 1999, it would be about 67 years in length. If 1942 was the beginning of (V), then we are now 76 years along on this wave approaching 78/79 years. It seems more likely to me based on the evidence I’ve presented, that GSC Wave (V) ended in 1999.
Either way, the coming crash should end up being the worst on a socio/political economic level that we’ve ever seen. Either way, I see at least a 75-80% drop and as much as 89-92% in our stock market coming to home to roost soon. We are creating unsustainable levels of debt around the world not just to businesses and government, but consumers as well.
We are having our own domestic pension crisis right now due to low levels of interest paid out (due to QE and virtually zero rates) and pensioners are getting a cut in pay. There simply is not the money there and trying to pay these pensions to increasing levels of Baby Boomer retirees is going to be difficult if not impossible.
The market meltdown contagion could start in the emerging markets where already there is a currency crisis developing. The rot is already showing up. Our own real estate market is in an unsustainable bubble that is soon meeting a point in 2020 where Baby Boomers will start selling their homes and downsizing even as the Millennials step up their spending ability.
Everything points to a R.E top in 2020. When our stock market gets into the frenzy stage where even the taxi driver starts bragging to his customers how much he’s made in the stock market then it’s time to sell. We aren’t there yet.
No doubt, our stock market is overvalued, but we haven’t gotten to the frenzy stage yet (like Bitcoin in 2017). The FED is raising rates into this Trump induced mini boom and that is another danger we need to recognize. People keep calling for a top now in 2018 and it never seems to happen. This just makes things worse as it causes complacency and the urge to get in on the boom that people have missed causing even more speculative fever. When the next good sized dip occurs, that is when the last of the buy the dip crowd will enter and cause the last buying frenzy to dizzying proportions, probably above 3400 on the S&P 500 or more.
A few years ago, I mentioned starting a program called Eagles Over America as a preparedness move to, much like preparing for a Cat 5 hurricane. My original work told me to look for a top around 2018 and a low around 2020/21 based on Benner’s Cycle. President Trump has been a wild card in this whole equation. Our market continues to go up, but most world markets have been falling.
I realized last year that I was early in my call for a top in 2016 as most are right now. Still, the call to action now to get ready is imperative. I can’t imagine the social implications of a crash like what is coming and how it will affect us here in the United States and even the world. We hardly know our neighbors and families anymore as we become increasingly isolated due to the technological shift in how we communicate.
Building communities within and around local communities that we can depend on is going to prove to be beneficial in the future, in my opinion. We need to educate people on the merits of financial diversification, food storage, and preparedness in general, basically preparing for the worst, but hoping for the best.
My study of cycles and waves suggest all classes of assets will be affected by the coming crash, this includes real estate, the stock market, bond market and yes, precious metals and mining shares. Does this mean you need to sell your home and precious metals?
People still need to have a home to live in and owning small denominations of silver and gold may prove to be useful in barter should the banks shut down. Still, there are ways to make a lot of money when the market crashes and this avenue might need to be more prudently investigated. Cash will also be king in a crash: cash kept outside of banks and safety deposit boxes. Food storage, security, water, energy sources, growing your own food may prove to be more valuable than cash and precious metals if things really break down.
My website at http://eaglesoveramerica.com is a membership site where people can come together and try to solve some of the problems we may face and yes, prosper in spite of it. With the financial elite building bomb shelters and buying homes in New Zealand, don’t expect them to help you out. Don’t expect the government or politicians to warn you, as this would be political suicide. Ron Paul is one of the few out there trying to get the message out.
The massive touting of precious metals as a cure all for the coming crash really concerns me though. What happened to silver and gold in the last crash in 2008? Silver went to under $9 and gold under $700 an ounce. The cycle/waves I study suggest that they too will fall in price when the crash comes. The premiums rose on small denominations of PM’s when the 2008 crash happened, but still the prices fell. A diversified approach to the coming crash would seem the best option I would think. Those who are the most liquid at the bottom will be able to pick up massive bargains and be the new movers and shakers in the next phase of the economy.
Eagles Over America is about creating solutions to the coming problems and creating communities. We need to get the word out. We need to be proactive. We need to get out a head of it. I believe the very survival of our Republic may be at stake.
Now on to the micro message: the US stock market looks toppy to me. The normal rally into monthly options expiration has occurred with the Dow 30 making a new high while other indices like the S&P 500, NASDAQ, and Russell 2000 are languishing. Still, the transports have made a new high suggesting general strength into at least the next 3 months. My best guess for next week is we fall into Sept 18/19 to fulfill the 8 TD low/Mars-Uranus Square. The previous S&P 500 floor of 2864 may be taken out even into the low/mid 2850’s.
I am short the stock market with my system, short via the 3X ETF’s SPXS and UVXY (long volatility) and long the miners with NUGT. NUGT looks good to me as a hold into late October. I believe we likely see a sharp drop in the dollar and a good rise in the precious metals into late October. After that it gets iffy.
The FED meets on Sept 25-26 and usually this causes a top or topping action in the stock market around this meeting. My work suggests a top around Sept 24-26 and a sharp drop into early October. I don’t think we drop much below the 2790/2800 SPX area even in a worst case scenario, at least over the next few weeks.
Next weekend in Section Two, I’m going to bring out the charts and explain why I see what I’m seeing going forward on both a macro and micro level. Meanwhile, I encourage you to become a part of our ever growing community at http://eaglesoveramerica.com
Brad Gudgeon
Editor of The BluStar Market Timer
The BluStar Market Timer was rated #1 in the world by Timer Trac in 2014, competing with over 1600 market timers. This occurred despite what the author considered a very difficult year for him. Brad Gudgeon, editor and author of the BluStar Market Timer, is a market veteran of over 30 years. The website is www.blustarmarkettimer.info To view the details more clearly, you may visit our free chart look atwww.blustarmarkettimer.com
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Disclaimer: The above information is not intended as investment advice. Market timers can and do make mistakes. The above analysis is believed to be reliable, but we cannot be responsible for losses should they occur as a result of using this information. This article is intended for educational purposes only. Past performance is never a guarantee of future performance.
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