Continuation of part 1 

Imagine for a second that you are watching the New York Philharmonic Orchestra. As the show starts you see over 50 musicians sitting on stage and playing their musical instruments. The instruments themselves vary across the board.  There is a piano, dozens of violins, trombones, cellos, bass, etc…  As musicians begin to play, beautiful and harmonious music begins to flood the concert venue. If we stop at this juncture, we would miss an important clue that can help us time the markets with great precision.

As the music plays, a number of very important developments occur behind the scenes. To begin with, music itself is nothing more than a vibration or a wave or a cycle or an oscillation.  Each musical instrument and each player produce a range of vibrations while playing their instruments. That creates music. So a single musician will produce  a rate of vibration/oscillation that at least in technical terms is identical to the structure of the cycle. Now, having 50 musicians in our orchestra simply means that at any given second there are 50 different cycles (vibrations/waves) being created by 50 different musicians and instruments. They vary across the board and are as diverse as possible.

Yet, they all come together to create beautiful and harmonious music.  I cannot stress this enough. All 50 of the cycles (vibrations/waves)  unify  into 1 primary cycle by the time music reaches your eardrum.  No longer are you listening to 50 different vibrations, you are now listening to only one.  You are listening to the summation of these vibration, to the final result.  Finally, this end product or the summation of all of these cycles could be represented on the chart as a singular wave moving up and down over time.

What does this have to do with the stock market?

If you are to chart the final result or the final musical wave generated by the 50 musicians above it would look identical to the 2-Dimensional chart of any given stock or of the overall chart of the stock market.  It wouldn’t be identical, but it would look identical as if the music you have just heard is being tracked by the stock market charting service. This yields an important clue when it comes to the stock market cycle analysis.

Basically, there are many different cycles working in the stock market at the same time. Their range, structure, power and amplitude are as diverse as you can imagine. While some cycles last for decades and even centuries, others oscillate every few minutes. However, once we identify all of these cycles and put them all together, we end up with an exact representation of the overall stock market. When I say exact, I mean exact.

Let me repeat this. If the cycle structure is fully understood and constructed properly you can build an exact replica of the stock market. Not only for the past, but also for the future. Once the cycles are known you can predict the exact structure of all upcoming stock market moves to the point and to the day. Confirming both the fundamental and 3-DV analysis work described earlier.  

To be continued…… 

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Timing The Market With Cycles (Part 2) 

Thus far we have looked at the3-Dimensional stock market analysis as the primary tool in predicting the stock market or individual stocks in both price and time. Yet, there is another way to perform the same type of analysis.  It is called cycle work.

At the same time it is not the typical cycle work associated with the stock market. Relatively speaking cycle analysis has been around for as long as the stock market has been opened. People have been using various cycle constructs to try and predict the market.  Thus far without too much luck. Any analyst working with trying to time the markets through the use of cycle work would soon tell you that at times his cycles work perfectly fine, being able to predict the market with great accuracy and at times, they don’t work at all.  Believe it or not, there is a reason for it and that reason will be discussed in greater detail shortly.  

However, before we go any further we need to define what cycle analysis really means. In traditional sense of the word, it means studying various time cycles and then trying to apply them towards the stock market.  The simplest form of such exercise is identifying one market cycle and then trying to fit it into your market forecast. As a hypothetical example, an analyst studying NASDAQ market structure is able to determine that all stocks in the index go up for 14 trading days and then decline for 5 trading days. Then they go up for another 8 trading days and then decline for next 3 trading days. Thereafter, the cycle repeats itself indefinitely.

Of course, no such cycles exist, but it gives you an idea of how you should think about cycles. On a more complex level an analyst might put together hundreds of various cycles in order to try and predict not only the time but the value of the move.  While such cycle analysis is fairly complex, it does produce interesting and sometimes incredibly accurate results. The keyword is….sometimes.

Which begs the question, why does cycle analysis only works on limited basis?

The simple answer has to do with the 3-Dimensional analysis discussed in the previous section. The cycles do not work very well or they do break down after a certain period of time because they are being applied in the wrong medium. In this case, the 2-Dimensional chart of price moving over time. As mentioned earlier in the book, the 2-Dimensional chart construct is nothing more than a shadow of the real stock market movement. As you can imagine, no proper outcome can come from studying the shadow as opposed to studying the real move.

At the same time, when we apply cycle analysis to the 3-Dimensional construct of the market we begin to see a completely different picture. We begin to see periodicity in the cycle analysis that can be used to predict the markets with great accuracy. Not only that, but we gain a further understanding of how the markets truly works. Let me give you an example.

To be continued…… 

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Timing The Market With Cycles 

Continuation of part 11

Avoid Loss Averaging: Contrary to a popular believe, it is not a good idea to buy more stock when the price declines after your purchase.  Buying more at a discounted price means you are going against the main trend and not with it. While you lower your overall purchasing price, the main issue remains. The main trend is down. Instead, you should average up when the stock price is going up. That way you are going with the trend.  

Now that we have looked at the overall rules to the profitable stock market operations, let’s take a quick look at a simple set of specific trading rules.

Rules For Trading In Stocks

RULE 1:  Buy at new high prices or old top levels.

RULE 2: Buy when prices advance above old low prices.

RULE 3: Sell when prices decline below old top levels or high prices.

RULE 4: Sell at new low price levels.  

RULE 5: Wait to buy or sell until prices CLOSE above old highs or below old lows on the daily charts. Closing price is incredibly important.

RULE 6: Use stop losses. Your capital and your profits must be protected at all times with STOP LOSSES. Implement stop losses at 1-3 points above or below your original price and at the time of the original trade.

RULE 7: Do not lose money.

In this section we have looked at 3-DV analysis, triangulation and various trading rules associated with trading the markets. By performing 3-Dimensional analysis for the DOW between 1994-today I have demonstrated without a shadow of the doubt the hidden structure within the stock market. Once that structure is fully understood (well, even before), an exact forecasts could be made. Once the analyst understands the lattice structure of the market, he can calculate it 1 year, 10 years or 100 years into the future with astonishing accuracy.

Further, we have looked at triangulation and various trading rules to minimize the risk associated with 3-Dimensional analysis.  By following all the rules described above, any stock market participant should be able to profit greatly. After all, an analyst using the work above in an appropriate fashion should know what the market will do and should act accordingly. In the next section we will look at another powerful tool to time the market with great precision. 

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Stock Market And 3-Dimensional Analysis (Part 12)