Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
Silver Price 2021 Roadmap - 22nd Jan 21
Why Biden Wants to Win the Fight for $15 Federal Minimum Wage - 22nd Jan 21
Here’s Why Gold Recently Moved Up - 22nd Jan 21
US Dollar Decline creates New Sector Opportunities to Trade - 22nd Jan 21
Sandisk Extreme Micro SDXC Memory Card Read Write Speed Test Actual vs Sales Pitch - 22nd Jan 21
NHS Recommends Oximeter Oxygen Sensor Monitors for Everyone 10 Months Late! - 22nd Jan 21
DoorDash Has All the Makings of the “Next Amazon” - 22nd Jan 21
How to Survive a Silver-Gold Sucker Punch - 22nd Jan 21
2021: The Year of the Gripping Hand - 22nd Jan 21
Technology Minerals appoints ex-BP Petrochemicals CEO as Advisor - 22nd Jan 21
Gold Price Drops Amid Stimulus and Poor Data - 21st Jan 21
Protecting the Vulnerable 2021 - 21st Jan 21
How To Play The Next Stage Of The Marijuana Boom - 21st Jan 21
UK Schools Lockdown 2021 Covid Education Crisis - Home Learning Routine - 21st Jan 21
General Artificial Intelligence Was BORN in 2020! GPT-3, Deep Mind - 20th Jan 21
Bitcoin Price Crash: FCA Warning Was a Slap in the Face. But Not the Cause - 20th Jan 21
US Coronavirus Pandemic 2021 - We’re Going to Need More Than a Vaccine - 20th Jan 21
The Biggest Biotech Story Of 2021? - 20th Jan 21
Biden Bailout, Democrat Takeover to Drive Americans into Gold - 20th Jan 21
Pandemic 2020 Is Gone! Will 2021 Be Better for Gold? - 20th Jan 21
Trump and Coronavirus Pandemic Final US Catastrophe 2021 - 19th Jan 21
How To Find Market Momentum Trades for Explosive Gains - 19th Jan 21
Cryptos: 5 Simple Strategies to Catch the Next Opportunity - 19th Jan 21
Who Will NEXT Be Removed from the Internet? - 19th Jan 21
This Small Company Could Revolutionize The Trillion-Dollar Drug Sector - 19th Jan 21
Gold/SPX Ratio and the Gold Stock Case - 18th Jan 21
More Stock Market Speculative Signs, Energy Rebound, Commodities Breakout - 18th Jan 21
Higher Yields Hit Gold Price, But for How Long? - 18th Jan 21
Some Basic Facts About Forex Trading - 18th Jan 21
Custom Build PC 2021 - Ryzen 5950x, RTX 3080, 64gb DDR4 Specs - Scan Computers 3SX Order Day 11 - 17th Jan 21
UK Car MOT Covid-19 Lockdown Extension 2021 - 17th Jan 21
Why Nvidia Is My “Slam Dunk” Stock Investment for the Decade - 16th Jan 21
Three Financial Markets Price Drivers in a Globalized World - 16th Jan 21
Sheffield Turns Coronavirus Tide, Covid-19 Infections Half Rest of England, implies Fast Pandemic Recovery - 16th Jan 21
Covid and Democrat Blue Wave Beats Gold - 15th Jan 21
On Regime Change, Reputations, the Markets, and Gold and Silver - 15th Jan 21
US Coronavirus Pandemic Final Catastrophe 2021 - 15th Jan 21
The World’s Next Great Onshore Oil Discovery Could Be Here - 15th Jan 21
UK Coronavirus Final Pandemic Catastrophe 2021 - 14th Jan 21
Here's Why Blind Contrarianism Investing Failed in 2020 - 14th Jan 21
US Yield Curve Relentlessly Steepens, Whilst Gold Price Builds a Handle - 14th Jan 21
NEW UK MOT Extensions or has my Car Plate Been Cloned? - 14th Jan 21
How to Save Money While Decorating Your First House - 14th Jan 21
Car Number Plate Cloned Detective Work - PY16 JXV - 14th Jan 21
Big Oil Missed This, Now It Could Be Worth Billions - 14th Jan 21
Are you a Forex trader who needs a bank account? We have the solution! - 14th Jan 21
Finetero Review – Accurate and Efficient Stock Trading Services? - 14th Jan 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

Dow Jones Stock Market Cycle Analysis - Trend Still Up, Still Positive, But Caution is Advised

Stock-Markets / Cycles Analysis Jan 28, 2007 - 04:30 PM GMT

By: Tim_Wood

Stock-Markets

The positive for the market is obviously that it continues to move higher and higher as the advance out of the June/July lows remains intact. According to Dow theory, the Secondary Trend also remains intact and as I read the Dow theory I also believe that the Primary Trend is also positive. Cyclically, the longer-term trend remains positive as well. So, let me make it clear that until a confirmed downturn according to Dow theory and/or a cyclical breakdown of at least intermediate degree occurs, this advance cannot be called done.


Now, I want to talk about a few of the problems and reasons for concern about the ongoing advance. First and contrary to popular opinion, the long-term data continues to suggest that the 4-year cycle low is still ahead of us. I am totally aware of the fact that most people are of the opinion that the 4-year cycle low occurred at the June/July 2006 lows. The problem with such opinion is that it is a convenient answer and not based on any of the historical “DNA” markers that have occurred at other 4-year cycles in over one-hundred years of market data. By saying this I am not trying to fight the trend, because again I agree that as of this writing the trend is still up in accordance with both the Dow theory and my cyclical based work.

What I am saying here is that the 110 years of market data available on the Industrials continues to suggest that this advance is carrying the market into the 4-year cycle top rather than the move out of the summer lows being the 4-year cycle low, as most of the rest of the world believes. The full details and ongoing developments surrounding this opinion are far beyond the scope of this brief article.

Below, I have included a chart of the Industrials from their inception in 1896 to 1940. I have marked each of the 4-year cycle lows with a blue number “4”.

Dow JOnes 1929 crash chart

In the next chart below we have the Industrials from 1940 into the 1982 4-year cycle low and again you can clearly see the ebb and flow of this cycle.

Dow Jones 60 year chart

Lastly, we have a chart of the Industrials showing the 4-year cycles from 1982 to present. Again, you can see the ebb and flow of the 4-year cycle. It is true that the declines into 1990 and particularly the decline into 1994 were modest. However, those declines still measured up to the historical “DNA” markers that have been present at all previous 4-year cycle lows since 1896.

Dow Jones 20 year chart

To the contrary, the decline into the summer lows of 2006 did not meet any of the historical “DNA” markers that have been present at all of the previous 27 4-year cycle lows since 1896. Sure, the market can do anything and there is a first time for everything. But, at present there still is no hardcore supportive data that the 4-year cycle low occurred last summer. As a result, the odds simply suggest that this advance is still pushing up into the 4-year cycle top and that the low still lies ahead. I know this may be hard to believe, but this conclusion is not some shallow opinion. My opinion is based on substantial quantitative analysis.

Think of it like a blood test from the doctor. Just because you don't feel bad isn't justification that his lab work is invalid. By the same token, just because the rest of the world believes that the summer low marked the 4-year cycle low and the market has continued to hold does not mean that they are correct. I can promise you, they don't have the statistical quantification surrounding the 4-year cycle that I have.

Next, I want to talk about the Dow theory piece of the equation and first let me say that cycles are not a part of Dow theory. But, it is an historical fact that the vast majority of all 4-year cycle tops have also occurred in conjunction with a Dow theory non-confirmation. Such non-confirmation is marked in red and can be seen in red on the chart below as the market moved into the 2000 top. The current non-confirmation is noted in green and has been ongoing since May 2006.

DJIA 7 year chart

I have said this before, but let me say it again. Non-confirmations are not buy and sell signals. Rather, they are warnings that a possible trend change is in the making. So, as long as this non-confirmation is in place, it must be respected as the warning that it is.

In spite of the Dow theory non-confirmation and the statistical quantifications surrounding the 4-year cycle the public remains very bullish and completely oblivious to the current market risk. One measure of this sentiment comes from the Investor Intelligence data. Below is a weekly chart of the Industrials along with the weekly Investor Intelligence readings in the upper window. We have just completed the 223 rd consecutive week with this reading either at or above the 50% level. When this indicator is at the 50% level it means that there are just as many bulls as there are bears. When this indicator is at 75% it is telling us that there are 3 times as many bulls as there are bears.

The point here is that optimism among investors ebbs and flows with market cycles. For example, since the inception of the Investors Intelligence data every 4-year cycle low has occurred with extreme pessimism. All the while, 4-year cycle tops are made with extreme bullishness and optimism. So, it is a fact that most people are the most bullish at or near a top and that most people are the most bearish at or near a bottom. Please understand that just as with non-confirmations sentiment data does not yield buy and sell signals, but rather serve as an indication of the overall mood of the market place. Let me also add that since the inception of the Investors Intelligence data back in the 1960's there has never been a period of such persistent bullishness. Even during the bull market of the 1990's and into the 2000 top this level of consistent bullishness was not seen. At 223 consecutive weeks at 50% or more we are indeed at record bullish levels. What this amounts to is that this entire 4-year cycle advance has occurred with the plurality of bulls over bears and that has never occurred before.


One danger here is that the statistical data continues to warn that we are moving into the 4-year cycle top and we also still have a Dow theory non-confirmation that has yet to be corrected. At the same time, we also have far too many people on the optimistic side of the boat as is evident by the sentiment data. If the Dow theory non-confirmation is not corrected and if the statistical data surrounding the 4-year cycle is correct this time around, then when sentiment begins to shift, there is going to be an awful lot of people running to the other side of the boat. Point being, we do have considerable market risk in spite of the fact that we still have a positive trend and if the cattle were to spook, things could/should get very interesting very quickly.

By Tim Wood
Cyclesman.com

Tim Wood specialises in Dow Theory and Cycles Analysis. To get the technical and statistical facts and know when significant turns come based on the ever so important Cycle Turn Indicator Visit www.cyclesman.com/testimonials.htm.

Should you be interested in very detailed and solid factual quantitative analysis on the 4-year cycle, then you should consider Cycles News & Views. Such analysis and on going developments are far beyond the scope of these brief articles. Please also understand that I simply cannot make these details available to the general public. I cover not only the stock market but, the dollar, gold and bonds. I also report on other key markets such as oil, gasoline and copper at important turn points using my Cycle Turn Indicator and updates three times a week. A more recent call by the Cycle Turn Indicator was the down turn out of the December counter trend bounce in oil and then the low that was made just last week. If I could only have one indicator, it would be the Cycle Turn Indicator. Get the technical and statistical facts and know when significant turns come based on the ever so important Cycle Turn Indicator.


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


Comments

sharetipsinfo
27 Sep 08, 01:53
indian stock market

Hi,

Your blog is nice and informative. We would like to share few information’s with users.

Indian stock market is not a place for speculators anymore.

As it has become too volatile. Still day traders are requested to trade with strict discipline and a small suggestion for Long term players is don’t take any long term delivery position as Nifty and Sensex are still in bearish zone. Just wait for right time and opportunity before taking long position.

For any doubt please feel free to ask us.

Thanks

Regards

http://www.sharetipsinfo.com


Post Comment

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

6 Critical Money Making Rules