Cycle theory is a rule-based, price-validated framework:
Time sets the stage, price confirms success or failure, broken primary lows override optimism and broken primary highs override pessimism.How we define a cycleThe 360-day calendar is a method of measuring durations used in financial markets, in computer models, in ancient literature, and in prophetic literary genres.
It is based on merging the three major calendar systems into one complex clock, with the 360-day year derived from the average year of the lunar and the solar: (365.2425 (solar) + 354.3829 (lunar))/2 = 719.6254/2 = 359.8127 days, rounding to 360.A 360-day year consists of 12 months of 30 days each, so to derive such a calendar from the standard Gregorian calendar, certain days are skipped.For example, the 27th of June (Gregorian calendar) would be the 4th of July in the USA.
One can easily judge the efficacy by turning the formula into a strategy that enters the cycle high and lows. The formula is 100 percent based on timing and has nothing to do with the price action of the market itself. The screenshot shown here validates the Utility in using this cycle as indicator for swing trading. The numbers shown here are for the US dollar. However, this is consistent across all markets that show 55% of the time 29 day cycle produces high pivots and low pivots for a swing trader.
The Rule of Alternation
The rule says "expect change" at calendar demarcations. The change of seasons from winter to spring, the move into a new quarter of the year, is an easy to see point in time when people change. A young man's heart turns to romance, homeowners engage in a spring clean after wintering indoors.If you missed the short video here is a reproduction of the first year of the new millennium. It is a textbook example of alternation. It shows the market moving from action to rest and back to rest again every hundred days give or take a few days.
Along with other key cycles and relevant factors, after 120 days into the new year and 120 days of low energy trading, things are about to change. Refer to MarketMap™ 2023 Scenario Planner seen below with the 20-year cycle from 1921 to date and more in the chart gallery.
The importance of cycle theory is how it does more than defines a bullish or bearish market. It predicts the direction of the trend based on the markets ability to hold (bullish) primary cycle lows or its inability (bearish) to hold the lows.
Cycles also provide insights into the direction of the markets - its duration based on the length of the cycle- according to its behavior. When the market peaks late in the cycle that is bullish and when it has a high ROC advance out of its first sub-cycle that has a bullish meaning as well. The key words as always are "success" or "failure."
The first chart of the Dow bottom in 2021 is the beginning for us with the 20-year cycle. The big bear market anchors the low that year which is also the return a long-term of synodic 20-year cycle.
While the speculative peak in 1929 was suspected by many the crash was not and by the time it was over the bear took out the low of 1921. By rule the 20-year cycle low - the primary long-term cycle - was broken, setting into motion a bear market that would last into the next 20-year cycle.
In 1941 WWII happened with the next 20-year cycle, which has an association with armed conflicts. From the 1940 panic and the bear market it produced ending in 1942 with the 20- year cycle a new secular bull had begone.
Primary cycle lows held kicking off the nifty fifties into the next 20-year cycle low in the early 1960s. A look at the chart in the gallery makes it clear the cycle was right-handed, a clear indication of a bull market in progress.
The secular bull lasted in the late 1960's and the primary cycle peaked about ten years into it, reflecting the 40% trading range the Dow had fallen into. After the first four-year cycle kicked off the longer-term bull, the remainder of the 4-year sub-cycles failed to act bullishly, and the lows gave way in 1975 killing the chances a major breakout until the next 20-year cycle in 1981.
The kickoff and breakout of the Dow has all the earmarks of a new bull market based on cycle theory leaving the expectations of a right-handed top late in the 20-year cycle, which is what the market gave us. The next chart starting in the year 2000 shows the right-handed nature of the bull run.
In 2003 the market provided a high ROC advance fitting the bullish cycle it was in. However, the Dow in 2009 took out the primary cycle's bottom putting the secular bull in doubt. Except the Nasdaq and the S&P did not take out the primary cycle lows setting up a bullish divergence followed by an A/D momentum buy signal.
From that four-year cycle low the secular bull that had started in 1981 was in gear with the larger cycle and peaked well to the right had side of the normal halfway crest, conferring its bull market status.
Parkinson's Law
Is the old adage that work expands to fill the time allotted for its completion. Parkinson's First Law states that "Work expands to fill the time available for its completion." Parkinson's Second Law: "Expenditures or "money paid" out rises to meet income."
Form precedes substance.
In early 2020 the pandemic caused the next big splash into the 20-year cycle low setting up the same significant pivot as the one posted one hundred years ago in 2021. That is the measure of a bear market if there is going to be one, the lows of 2020 will fall; and like 1929/1930 the low will fall quickly, there will be little or no reflect bounces to get out or get short. So, it's not just the boys at EWI that are big time bears, Contrary Thinker's MarketMap™ 2023 the cycle theorists see the bearish scenario here and now.
What draws power to the use of cycle is that it is more than calendar math, it is analytic geometry and objective astrology -there is no subjective personality profiling. For example, the primary twenty-year cycle is the Jupiter/Saturn cycle which returns.
While the map shows more advance into mid-June, which is possible given the bullish outlook for inflation into late summer, the pull of major astrological events that have shown significant pull power in the past cannot be ignored. Especially given the risk to an old bull market of at least 46% in one fell swoop.
The big-time lows show up in July - September. If the 3/15/23 lows can be taken out by the pull -power of the late May geo-cosmic events, a move above the late April pivot will not be expected.
Also, given the backdrop provided by the Technical Event Mode, a break lower here is expected to pick up a following in as hurry.
Last but not to be discounted, the Jupiter effect chart provided a few months back showing the mid-May period of the big turn into a major bear market. CT has a parallel crash period that fits based on market action, solar/lunar, and Astro cycles. There is a good reason the adage of "sell in May and come back in October" has stuck all these decades. It's not luck or for the bull's lack of the same.
Core Rules & Guidelines in the Brief
Great and Many Thanks,
Jack F. Cahn, CMTContrary Thinker since 1989,
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