Use Cycles to Provide a Market Timing Edge

Update - The economy is in Stage 6 where all assets contract.

Description - The business cycle is a sine wave with 6 stages:

Stage 1 - Economy is contracting and bonds turn up as interest rates decline. Economic weakness favors loose monetary policy and the lowering of interest rates, which is bullish for bonds.

Stage 2 - Marks a bottom in the economy and the stock market. Even though economic conditions have stopped deteriorating, the economy is still not at an expansion stage or actually growing. However, stocks anticipate an expansion phase by bottoming before the contraction period ends.

Stage 3 - Shows a vast improvement in economic conditions as the business cycle prepares to move into an expansion phase. Stocks are rising and commodities are anticipating an expansion phase by turning up.

Stage 4 - Marks a period of full expansion. Both stocks and commodities are rising, but bonds turn lower because the expansion increases inflationary pressures. To combat this, interest rates start to move higher.

Stage 5 - Marks a peak in economic growth and the stock market. Even though the expansion continues, the economy grows at a slower pace because rising interest rates and rising commodity prices take their toll. Stocks anticipate a contraction phase by peaking before the expansion actually ends. Commodities remain strong and peak after stocks.

Stage 6 marks a deterioration in the economy as the business cycle prepares to move from an expansion phase to a contraction phase. Stocks have already been moving lower and commodities now turn lower in anticipation of decreased demand from the deteriorating economy.

Note that in a deflationary environment, bonds and stocks would move in opposite directions.

Update - The S&P 500 is below all moving averages and trending down. Breadth and technical oscillators are not yet oversold, so more downside is possible. As of 9/16/22 it has been in a downtrend for 19 days.

Description - The Oscillator Cycles has four parts: moving averages, the relative strength index (RSI), the volatility (VIX) and breadth Indicators. The market moves from overbought to oversold in movements that can last 10 to 40 trading days. Price trending above the moving averages is the key, however the other indicators tip us off when then trend will change. This cycle is most important for short term traders.

Update - We are in a 2 year, which tend to have a lot of downside volatility. In more detail, there will be a 9/30/22 bottom, followed by a strong uptrend until 12/1/22.

Description - The 10-year “Decennial” Cycle provides a tendency for years that end with a certain digit:

0 crash, 1 chop, 2 drop, 3 to 6 up, 7 to 8 crash, 9 recover

Update - September and October tend to be bearish during Midterm Election years.

Description - The market tends to have bullish and bearish seasons and months. The best 6 months are from November to April and the worst 6 months are from May to October. April, July and December tend to be bullish months due to holiday rallies. February, March, September and October tend to be weak due to tax reasons. Additionally, this cycle is affected by the Presidential Cycle.

Update - We are in a Year 2 Midterm Election year which is the most bearish.

Description - This is a 4-year cycle:

Year 1 - Post Election years tend to be mildly bullish.

Year 2 - Midterm Election years tend to be the most bearish.

Year 3 - Pre-Election years tend to be the most bullish.

Year 4- Election Years tend to be mixed with sharp bearish times and strong bullish times.

Update - The Gann Master Cycle points to lower prices for the S&P 500 until a bottom on 9/30/22. The market will then rise until 10/13/22, and decline to a double bottom on 10/27/22. The market will then enter a bullish phase until the next top at 5/4/23.

Description - This is the time cycle used by legendary trader W.D. Gann.

Update - The North Node is in Taurus, as business volume moves from normal to below normal. The NN moves to Aries on 7/13/23, where it continues to deteriorate.

Description - This is an 18-year cycle that predicts economic activity and is based on the North Node cycle. When the North Node passes through Scorpio and Libra, business goes through a transition phase from normal to above normal, creating a period of prosperity and bull market. When it reaches Leo, it hit a high point. When it passes through Cancer and Gemini it moves from high to normal. When it cycles through Taurus and Aries, business volume goes from normal to below normal. When it passes through Pieces and Aquarius business volume is low. Business volume hits a low as the North Node moves out of Aquarius. As the NN moves through Capricorn and Sagittarius business volume moves from below normal to normal. The cycles then repeats.

Update - The next downturns will come in January 2023 and September 2023

Description - The Professor Weston Cycle is a 20-year stock market cycle governed by the Jupiter-Saturn Cycle. It is good at predicting downturns in the market.

Update - Mercury retrograde dropped the market around 9/10/22. This will turn direct on 10/3/22, alleviating downward pressure on the market. Venus will leave Virgo on 9/29/22 also providing a tailwind to the market.

Description - This is a mix of planetary cycles and aspects that tends to move the markets.

Update - We are expected to start a 4 year bust cycle in 2024.

Description - The real estate market goes through an 18-year cycle of 4 years of bust, 7 years of recovery, and 7 years of boom.