Best of the Week
Most Popular
1. US Housing Market Real Estate Crash The Next Shoe To Drop – Part II - Chris_Vermeulen
2.The Coronavirus Greatest Economic Depression in History? - Nadeem_Walayat
3.US Real Estate Housing Market Crash Is The Next Shoe To Drop - Chris_Vermeulen
4.Coronavirus Stock Market Trend Implications and AI Mega-trend Stocks Buying Levels - Nadeem_Walayat
5. Are Coronavirus Death Statistics Exaggerated? Worse than Seasonal Flu or Not?- Nadeem_Walayat
6.Coronavirus Stock Market Trend Implications, Global Recession and AI Stocks Buying Levels - Nadeem_Walayat
7.US Fourth Turning Accelerating Towards Debt Climax - James_Quinn
8.Dow Stock Market Trend Analysis and Forecast - Nadeem_Walayat
9.Britain's FAKE Coronavirus Death Statistics Exposed - Nadeem_Walayat
10.Commodity Markets Crash Catastrophe Charts - Rambus_Chartology
Last 7 days
Stock Investors What to do if Trump Bans TikTok - 5th Aug 20
Gold Trifecta of Key Signals for Gold Mining Stocks - 5th Aug 20
ARE YOU LOVING YOUR SERVITUDE? - 5th Aug 20
Stock Market Uptrend Continues? - 4th Aug 20
The Dimensions of Covid-19: The Hong Kong Flu Redux - 4th Aug 20
High Yield Junk Bonds Are Hot Again -- Despite Warning Signs - 4th Aug 20
Gold Stocks Autumn Rally - 4th Aug 20
“Government Sachs” Is Worried About the Federal Reserve Note - 4th Aug 20
Gold Miners Still Pushing That Cart of Rocks Up Hill - 4th Aug 20
UK Government to Cancel Christmas - Crazy Covid Eid 2020! - 4th Aug 20
Covid-19 Exposes NHS Institutional Racism Against Black and Asian Staff and Patients - 4th Aug 20
How Sony Is Fueling the Computer Vision Boom - 3rd Aug 20
Computer Gaming System Rig Top Tips For 6 Years Future Proofing Build Spec - 3rd Aug 20
Cornwwall Bude Caravan Park Holidays 2020 - Look Inside Holiday Resort Caravan - 3rd Aug 20
UK Caravan Park Holidays 2020 Review - Hoseasons Cayton Bay North East England - 3rd Aug 20
Best Travel Bags for 2020 Summer Holidays , Back Sling packs, water proof, money belt and tactical - 3rd Aug 20
Precious Metals Warn Of Increased Volatility Ahead - 2nd Aug 20
The Key USDX Sign for Gold and Silver - 2nd Aug 20
Corona Crisis Will Have Lasting Impact on Gold Market - 2nd Aug 20
Gold & Silver: Two Pictures - 1st Aug 20
The Bullish Case for Stocks Isn't Over Yet - 1st Aug 20
Is Gold Price Action Warning Of Imminent Monetary Collapse - Part 2? - 1st Aug 20
Will America Accept the World's Worst Pandemic Response Government - 1st Aug 20
Stock Market Technical Patterns, Future Expectations and More – Part II - 1st Aug 20
Trump White House Accelerating Toward a US Dollar Crisis - 31st Jul 20
Why US Commercial Real Estate is Set to Get Slammed - 31st Jul 20
Gold Price Blows Through Upside Resistance - The Chase Is On - 31st Jul 20
Is Crude Oil Price Setting Up for a Waterfall Decline? - 31st Jul 20
Stock Market Technical Patterns, Future Expectations and More - 30th Jul 20
Why Big Money Is Already Pouring Into Edge Computing Tech Stocks - 30th Jul 20
Economic and Geopolitical Worries Fuel Gold’s Rally - 30th Jul 20
How to Finance an Investment Property - 30th Jul 20
I Hate Banks - Including Goldman Sachs - 29th Jul 20
NASDAQ Stock Market Double Top & Price Channels Suggest Pending Price Correction - 29th Jul 20
Silver Price Surge Leaves Naysayers in the Dust - 29th Jul 20
UK Supermarket Covid-19 Shop - Few Masks, Lack of Social Distancing (Tesco) - 29th Jul 20
Budgie Clipped Wings, How Long Before it Can Fly Again? - 29th Jul 20
How To Take Advantage Of Tesla's 400% Stock Surge - 29th Jul 20
Gold Makes Record High and Targets $6,000 in New Bull Cycle - 28th Jul 20
Gold Strong Signal For A Secular Bull Market - 28th Jul 20
Anatomy of a Gold and Silver Precious Metals Bull Market - 28th Jul 20
Shopify Is Seizing an $80 Billion Pot of Gold - 28th Jul 20
Stock Market Minor Correction Underway - 28th Jul 20
Why College Is Never Coming Back - 27th Jul 20
Stocks Disconnect from Economy, Gold Responds - 27th Jul 20
Silver Begins Big Upside Rally Attempt - 27th Jul 20
The Gold and Silver Markets Have Changed… What About You? - 27th Jul 20
Google, Apple And Amazon Are Leading A $30 Trillion Assault On Wall Street - 27th Jul 20
This Stock Market Indicator Reaches "Lowest Level in Nearly 20 Years" - 26th Jul 20
New Wave of Economic Stimulus Lifts Gold Price - 26th Jul 20
Stock Market Slow Grind Higher Above the Early June Stock Highs - 26th Jul 20
How High Will Silver Go? - 25th Jul 20
If You Own Gold, Look Out Below - 25th Jul 20
Crude Oil and Energy Sets Up Near Major Resistance – Breakdown Pending - 25th Jul 20
FREE Access to Premium Market Forecasts by Elliott Wave International - 25th Jul 20
The Promise of Silver as August Approaches: Accumulation and Conversation - 25th Jul 20
The Silver Bull Gateway is at Hand - 24th Jul 20
The Prospects of S&P 500 Above the Early June Highs - 24th Jul 20
How Silver Could Surpass Its All-Time High - 24th Jul 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

Stock Market 4 Year Cycle Low - Next Leg of the Downtrend Expected

Stock-Markets / Cycles Analysis Mar 11, 2007 - 12:12 AM GMT

By: Tim_Wood

Stock-Markets As the market advanced up out of the June/July 2006 low, many began proclaiming those lows as having marked the 4-year cycle low. With the last obvious 4-year cycle low having occurred on October 10, 2002 at 7,197.49 and when the October 2006 low that most were expecting did not occur, most pointed at the June/July lows as having marked the 4-year cycle low. I can understand why on the surface most people would have thought this. But, that was the easy answer for the market not making the low in October that so many were expecting.


I can promise you that cycle analysis is much more involved than simply counting from one point to the next. By nature, cycles contract and expand. But, this expansion and contraction does not invalidate the cycle, as it is the overall ebb and flow, or rhythm, that makes the cycle. However, it is because of the fact that market cycles are not precise mechanical events that we must also incorporate other tools such as statistical analysis and the use of technical indicators.

Everything in nature is a cycle of sorts and if you think about it, there are variations in most all cycles and the stock market is no different. Our heartbeat is a cycle as is our breathing. This doen't mean that they are so mechanical in nature that they are exact. Our heart may beat 70 beats one minute at one time of the day and 85 during another part of the day. The seasons of the year are also cycles, but here too, we can have a late, an early or even a mild season. However, these variations do not invalidate the cycle. A late spring does not mean that spring will not come.

The same goes for the migration of birds. Just because it may be late in the year and the geese haven't begun migrating doesn't mean they won't. True, there are other cycles in nature that are very mechanical or rigid such as the phasing of the moon and the tidal changes in the sea. The stock market does not have mechanical cycles and is more like the changing of the seasons in which there is a degree of fluctuation within the cycles. I could go on and on, but I think you get the point.

Now, let's get back to the stock market. As the market began to advance out of the June/July lows last year I publicly said that the summer rally had begun and that the market was going to move higher. At the same time, I also said that my statistical analysis surrounding the 4-year cycle said that we were still pushing into that top. In fact, I first published that I was looking for the 4-year cycle low in 2007 rather than 2006 in my February 2006 newsletter. This expectation was all based on trend quantification work and statistical analysis. I have not wavered from that analysis since because nothing has occurred to invalidate the statistics.

Anyway, as the Industrials approached the May 2006 high in September I did begin to question the rally. However, I repeatedly told my subscribers that in spite of my skepticism, as long as the intermediate-term Cycle Turn Indicator remained positive, higher prices were nonetheless still possible. So, yes I have been bearish since about September in regard to the 4-year cycle because the data told me that the market was pressing into a major top. But, at the same time I also acknowledged the fact that the intermediate-term Cycle Turn Indicator was positive and that higher prices were possible as the market continued to press up into the 4-year cycle top.

As it turned out, the Cycle Turn Indicator remained positive all the way into December, at which time it too began warning of an ominous top in the making and has since triggered an intermediate-term sell signal. As I now see it, the decline we saw last week was most likely the initial leg down into the 4-year cycle low, which still lies ahead. Further confirmation of this by my statistical "DNA markers" surrounding the 4-year cycle top are still developing. Yet, in spite of the existing market risk and the 533 point loss we saw for the week ending March 2nd, complacency is still high. Very few understand the market risk here and it still seems that most people who are aware of the 4-year cycle still believe that the low came in connection with the June/July 2006 low.

Also, in the wake of one of the worst single week declines in market history, I hear no one in the mainstream media, or even other market analysts talking about the possibility that the 4-year cycle low could still lie ahead. I was recently asked why this is.

The answer is simple. Mainstream is out to skew the story in the most bullish light they can and to heck with the truth. Do you really think that Cramer is going to come on the air and tell the public to sell because the market is at risk of a major decline into a cycle low? The mainstream media has not ever warned anyone of a decline that I'm aware of. I've studied the writings around the 1929 top and mainstream said then that all was fine.

Following are a few examples and please compare these quotes to the price action in the first chart below.

September 1929
"There is no cause to worry. The high tide of prosperity will continue." -- Andrew W. Mellon, Secretary of the Treasury.

October 14, 1929
"Secretary Lamont and officials of the Commerce Department today denied rumors that a severe depression in business and industrial activity was impending, which had been based on a mistaken interpretation of a review of industrial and credit conditions issued earlier in the day by the Federal Reserve Board." -- New York Times

December 5, 1929
"The Government's business is in sound condition." -- Andrew W. Mellon, Secretary of the Treasury

December 28, 1929
"Maintenance of a general high level of business in the United States during December was reviewed today by Robert P. Lamont, Secretary of Commerce, as an indication that American industry had reached a point where a break in New York stock prices does not necessarily mean a national depression." -- Associated Press dispatch.

January 13, 1930
"Reports to the Department of Commerce indicate that business is in a satisfactory condition, Secretary Lamont said today." - News item.

January 21, 1930
"Definite signs that business and industry have turned the corner from the temporary period of emergency that followed deflation of the speculative market were seen today by President Hoover. The President said the reports to the Cabinet showed the tide of employment had changed in the right direction." - News dispatch from Washington.

January 24, 1930
"Trade recovery now complete President told. Business survey conference reports industry has progressed by own power. No Stimulants Needed! Progress in all lines by the early spring forecast." - New York Herald Tribune.

March 8, 1930
"President Hoover predicted today that the worst effect of the crash upon unemployment will have been passed during the next sixty days." - Washington Dispatch.

May 1, 1930
"While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States - that is, prosperity." - President Hoover

June 29, 1930
"The worst is over without a doubt." - James J. Davis, Secretary of Labor.

August 29, 1930
"American labor may now look to the future with confidence." - James J. Davis, Secretary of Labor.

September 12, 1930
"We have hit bottom and are on the upswing." - James J. Davis, Secretary of Labor.

October 16, 1930
"Looking to the future I see in the further acceleration of science continuous jobs for our workers. Science will cure unemployment." - Charles M. Schwab.

October 20, 1930
"President Hoover today designated Robert W. Lamont, Secretary of Commerce, as chairman of the President's special committee on unemployment." - Washington dispatch.

October 21, 1930
"President Hoover has summoned Colonel Arthur Woods to help place 2,500,000 persons back to work this winter." - Washington Dispatch

November 1930
"I see no reason why 1931 should not be an extremely good year." - Alfred P. Sloan, Jr., General Motors Co.

January 20, 1931
"The country is not in good condition." - Calvin Coolidge.

June 9, 1931
"The depression has ended." - Dr. Julius Klein, Assistant Secretary of Commerce.

August 12, 1931
"Henry Ford has shut down his Detroit automobile factories almost completely. At least 75,000 men have been thrown out of work." - The Nation.

The same sort of headlines applied as the market began to decline out of the 1966 and the 1987 tops. More recently, do you remember anyone on TV warning you about the 2000 top and the decline that followed as price began to drop into the 2002 4-year cycle low that followed? No, we were all told that everything was fine and not to worry.

Well, my statistical analysis surrounding the 4-year cycle top in 2000 not only allowed me to make the call, but I missed the price target by a mere 200 points. That article was written in July 2001 with the Industrials well over 10,000 and this was later published in the November 2001 issue of Technical Analysis of Stocks and Commodities Magazine. It is these same technical and statistical methods that have and continue telling me that the odds are the 4-year cycle low is still ahead of us and that in all likelihood the 533 point decline seen for the week ending March 2nd was likely only the beginning.

For your convenience I have again included charts showing the ebb and flow of the 4-year cycle since the inception on the Industrials in 1896.

I can tell you that in spite of what the mainstream and most other analysts are saying about the market, my statistical analysis surrounding the current 4-year cycle appears to be on track in that the statistics still favor the 4-year cycle low being ahead.

By Tim Wood
Cyclesman.com

© 2007 Cycles News & Views; All Rights Reserved
Tim Wood specialises in Dow Theory and Cycles Analysis - If you are interested in a statistical and technical based source that also utilizes Dow theory and provides statistical probabilities as to what should occur, then Cycles News & Views may be for you. I also provide web-based updates giving short and intermediate-term turn points on the stock market, gold, bonds and the dollar, utilizing my Trend and Cycle turn Indictors. A subscription also includes short-term updates three nights a week. Please see www.cyclesman.com/testimonials.htm .


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


Comments

Wilfred
22 Mar 08, 17:32
4-yr cycle low

I do think we have seen the 4-yr cycle low in June/July 2006. This market decline we're seeing right now, I believe is culminating into the next 4-yr cycle low in 2010! With the credit crisis just beginning to unfold, this decline has a long way to go.


Post Comment

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

6 Critical Money Making Rules