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THE
MAGNIFICENT SEVEN Background:
The Old Bull Market Rumor (Never finished out of the money in a year ending in X5): Charts 1 - 3 show the Magnificent Longwave (Weekly) Cycles riding thru the NYSE today and into the future. The filter sum of sixteen weekly cycles is shown on each of the attached charts. Chart 1 shows the predicted (detrended) waveform for the NYSE Composite Index thru 2005. A top is being predicted for late Nov 2004 (hey, the elections are over – how long do you think this free ride will last people!?). This is probably the formation of a “right shoulder of a ten-year formation” in the NYSE Composite Index. There is a (probably) lower second top in July 2005 but after Dec 2004 the trend becomes downward in the NYSE Composite Index (for years to come after 2006). Chart 2 shows two possible bear rally attempts in the NYSE in 2006 (doomed to failure) as the major longwave weekly cycles are headed down with the dollar (no real bull market but the hype should be good). Chart 3 shows a sideways trading market in early 2007 following a minor top in late 2006. However, after an attempted rally in mid-2007 the market is predicted to suffer a dangerous decline again (4th wave down?) after Sept 2007 (hype Chinese stocks in summer of 2007 to the public and then bail-out – what a novel strategy!?) This may coincide with a major rally in foodstuff commodity prices as wheat, barley and hay become in short supply due to “famine cycle” (2007-2009) and gold becomes a financial asset again to the investing public (i.e., at the ready, gold bugs – your silver lining is really coming). Overall 2005 is going to be an exciting year – for bears and maybe prairie dogs. Maybe we should look at BEARX sometime in a future article. The Last Stagecoach out of Dodge (?): Chart 4 shows the predicted versus actual for the NYSE Weekly Composite Index. It looks like the amplitude for the 11-week cycle is too low and could be adjusted but the rough, longterm waveform pattern seems to be holding. The recent upturn in the NYSE is about 2 or 3 weeks later than originally predicted in May 2004. However, the predicted election “rally” in November is unfolding nicely. Beware of this market after Nov 2004. This looks like the last stagecoach out of Dodge for all you “buy and hold” mutual fund lovers – but maybe some of you will get lucky and catch a later stagecoach that gets pressed into service (or maybe not, just call 1-800-Get Out of Dodge)!? Large Weekly “ Cycle”: Chart 5 presents one of the largest current cycles in the NYSE Composite Index (the 150-week cycle). The cycle amplitude has been growing since 1987 due to the Fed’s printing presses running 24/7 with the blessings of Congress. Unfortunately (for some of us), this printer’s ink has a bad side effect of driving market cycles unstable which causes pre-ordained “mini-crashes” in the market indices and/or major dollar devaluations to stop the slide. This big cycle is now heading downwards – good luck on any long term rallies, Wall Street! Chart 6 shows what maybe one of the Fed’s favorite cycles, the 33-week to 36-week cycle. The existence of this strong cycle is why the 200-dma is hyped as an “analysis tool”. The 200-dma usually looks like it is “breaking down” just as this cycle is bottoming and turning upwards (see recent example in July/August in NYSE and S&P 500 Indices). Watch out when this cycle crosses the x-axis in late Jan 2005 and bottoms in March 2005. Remarks: For all you “optimistic bulls out there on Wall Street Rangeland”, we close with a little ditty from the 60s: “Bad Moon Arising” - Creedence Clearwater Revival (1969). “I see the bad moon arising. I see trouble on the way. I see hurricanes and lightnin'. I see bad times today. Don't go around (Wall Street) tonight, Well, it's bound to take your (financial) life,…”. (For the past six weeks I have been dealing with hurricane preparations/aftermath in Miami (daughter’s family) as well as in North Florida where I live so I know about hurricanes and lightnin’).
DISCLAIMER: The author is not a registered stockbroker nor a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity, index or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, the author recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.
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The
Magnificent Seven is a chronicle about the adventures of
Longwave Cycles who rode onto the “western scene” many
decades ago (would that be in 1913 in the US?). In this episode,
we look at an update of the NYSE (Weekly) Composite Index.
