Continuation of part 5….

PRIMARY CYCLES WORKING IN THE STOCK MARKET

(Please note that it took me a considerable amount of time to work out the cycles and their appropriate allocation. After reading this section, I would highly encourage you to perform your own cycle analysis to confirm the cycles below. Doing so will give you a better level of understanding and reassurance.)

Market Cycle #1: 5-Year Cycle. This cycle represents the primary trend in the stock market. In fact, this cycle had been mentioned earlier in this book when it was indicated that this particular cycle represents major long-term movements in the stock market. For example, 1982 to 1987, 1994 to 2000 and 2002 to 2007 are ALL represented by this exact five year cycle. Typically this cycle moves 5-years up and then 5 years down.

Internally, this cycle moves in the following fashion. Five years up and five years down. During the bull market the cycle moves 2 years up-1 year down-2 years up and during the bear market 2 years down-1 year up – 2 years down.  Because this cycle represents the primary trend in the stock market, an analyst who is working with this cycle would have to multiply the composite created by the cycles below by the five year cycle in order to create an accurate representation of the stock market.

Market Cycle#2: 52-Months Cycle. This cycle moves bottom to bottom every 52 months. Meaning the bull phase is represented by the first 26 months and the bear phase is represented by the following 26 months.

Market Cycle#3: 27-Months Cycle. This cycle moves bottom to bottom every 27 months. Meaning the bull phase is represented by the first 13.5 months and the bear phase is represented by the following 13.5 months.  

Market Cycle#4: 18-Month Cycle. This cycle moves bottom to bottom every 18 months. Meaning the bull phase is represented by the first 9 months and the bear phase is represented by the following 9 months.

Market Cycle#5: 13-Month Cycle. This cycle moves bottom to bottom every 13 months. Meaning the bull phase is represented by the first 6.5 months and the bear phase is represented by the following 6.5 months.

The cycles above represent the longer term moves in the market. However, as mentioned before cycle analysis can be applied to any time frame. An analyst working with shorter time frames (daily/hourly) would just have to narrow down the window of analysis in order to figure out the short term cycles and their relevant application to the stock market. When done, these shorter term cycles must be added into the composite above.  Doing so will produce a very accurate composite on both the long-term and the short-term time frames.

To be continued……

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Timing The Market & Advanced Cycle Analysis (Part 6)

Continuation of part 4

Let us study a sample market composite to gauge full understanding.  

This chart requires a little bit of explanation in terms of being able to mimic the actual stock market.

1. The chart above represents a sample  market composite over a 5 year period of time.
2. Please note 5 separate cycles located under the green line. Each line of different color represents a different cycle working over that period of time. Note that these cycles vary in amplitude, and most importantly, in spacing. While some cycles are moving up, others are moving down.
3. As these cycles move over time they interact with each other by either diluting each other or by amplifying energy in any particular direction.  For instance, major bull moves on the green line occur when most cycles are pointing up.
4. As you can see from the chart, all of these cycles started at different points in time.
5. The Green Line is the composite cycle of all cycles coming together. It is the summation of all of the moves, either up and down. By combining cycles in such a fashion we come close to mimicking the actual stock market move over that period of time.
6. The chart above is one step removed from getting the exact composite. That is done by multiplying the composite above (green line) by the main trend at the time. When we do that  properly, we end up with an extremely accurate representation of the stock market.

For instance, an analyst working with this composite would know not only the structure of the upcoming market, but the exact turning points and the length/velocity of any upcoming move. When done with precision, the final output of the composite above should mirror the actual market movements with scary accuracy. Of course, the same type of analysis can be applied to individual stocks. Before we can put together an actual real life composite, it is important that we first take a look and study all of the major individual cycles.  

To be continued…..

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Timing The Market & Advanced Cycle Analysis