QUICK LOOK REPORT #7: Dominant Trends in NYSE Index
by Dr. Stephen Rinehart
August 23, 2005

Background:

Quick Look Reports will look at a possible dominant trend in an Index, Equity or Commodity and some possible long-term (yearly) trends which could emerge from the dominant cycle(s) (the datasets will be weekly or monthly with the shortest cycle about 7 to 15 weeks or months). Quick Look Report # 7 looks at an update to the weekly prices of the NYSE Composite Weekly Index from 1958.

The primary seven weekly cycles in the NYSE Index are:  38, 64, 159, 204, 430, 894 and 1600-weeks (looks similar to S&P 500 and DJIA Weekly Indices). These cycles represent an approximate (within 10%) fit to the amplitude/phasing of the long term weekly NYSE Composite Index from 1958 thru July 2005. A prior prediction of the NYSE Composite Weekly was made in 2004 (see FSU Archives Rinehart on Magnificent Seven). This type of cycle analysis has proved to be very helpful to me in the past 25 years as “to what to look for in the future moves from the NYSE Weekly Index”. In particular, it does not matter what happens in the short term (less than 20 weeks) since it has no real significance in terms of the long term waveform in the NYSE.

This study includes the largest cycle in the NYSE Index weekly closings (the 438-week cycle) and this puppy will form a top in Aug/Sept 2007. Once this major long-wave cycle starts accelerating downwards it will take the NYSE Composite down with it (possibly after Jan 2008). It is possible no significant long term bull market in the NYSE Weekly Index will develop again until after this cycle finally bottoms on 11.11.11  (Nov 2011)!  However we may get a nice bear rally in late 2008 thru 2010 based on some shorter weekly cycles. It is believed this may all be in the context of a secular bear trend (36-38 year cycle now heading down) which should be clearly evident by the latter part of 2008 or early 2009.

Chart 1 shows the prediction for NYSE Weekly Index for the remainder of 2005. The chart shows the NYSE Composite Index has probably formed its final top(s) between Aug/Oct 2005. The NYSE Weekly Composite Index is predicted to begin a downtrend thru April/May 2006? We have a coming worldwide recession slowly in the making but it may not be clearly evident until March 2007.  It is highly questionable as to whether the NYSE Composite Index will see another top as high as the ones in 2005 (inflation weighted) again for almost the next three to five years (either on a rally in late 2007 or not until 2009)!?

Chart 2 shows the prediction for NYSE Weekly Index for 2006. The chart shows the NYSE Composite Index may form an intermediate bottom by June 2006 and a possibly “2006 summer rally” is in the offing – if the Fed can keep pumping these long-wave cycles.  This result is at variance with the NYSE Daily Closings (see Chart 6) for 2006 which predicts a continuing downtrend. It will depend upon the Fed’s Operations in mid-2006 as to what develops in the latter part of 2006 for NYSE.

Chart 3 shows the prediction for NYSE Weekly Index for 2007. The chart shows the NYSE Composite Index may have a significant rally off an intermediate bottom in mid-2006 and a possibly going all the way into the major top in the NYSE Weekly Index in late Dec 2007 or early Jan 2008.  This would be a nice lead-in to those 2008 Games in China but the smart money will get out before the Summer Games of 2008 begin. We should see a steady media stream of “great investing in China Articles by mid-2007” and how 2008 will be a turning point in Chinese economy.

Chart 4 shows the prediction for the NYSE Weekly Index thru 2009. After some possible downside action thru mid-2006, it looks like the Central Banks may have a shot at keeping the party going thru early 2007? The Central Banks are going to hit some major headwinds going into late 2007 – perhaps some legislation will be in-place to move some of those Social Security Accounts into the NYSE or a war in the Mid East by mid-2008 may move some major oil money back into the NYSE markets.

A lower bound on the price of oil would be probably around $50/bbl.

Chart 6 shows the prediction for the NYSE Daily closing prices thru 2006. It shows a significant downtrend in 2006 with a possible “sideways trading pattern” from March 2006 thru July 2006. The predicted coming major down cycles in the NYSE thru 2008 suggest that July 2006 maybe a “tipping point” (i.e., for a possible worldwide recession).  This timeframe should be watched carefully by investors.

Chart 7 shows the prediction for the NYSE Daily closing prices thru 2007. It shows a coming counter-rally for mid-2007 (this has been showing in the waveform for several years). The NYSE Weekly shows a possible top in Dec 2007 but the shorter daily cycles are suggesting the actual top may come in late summer 2007 (or there will be a double top). 

Bottom Line:

Conditions are currently favorable for the development of a major “cyclonic storm” in the NYSE after July 2006 – we will continue to track and report on developments in the real-time waveform which tracks back to 1958. We consider the NYSE will be moving into a High Risk situation by July 2006 (if not sooner) and possible Extreme Risk by early Jan 2008. Based a number of researches into various real-time waveforms in worldwide indices for the past several years, we are rapidly entering into unknown and possibly very dangerous currents in the world markets. These patterns should become rapidly manifest sometime after a top around Oct 25, 2005 in the US markets. The long “sideways” trading pattern we have seen in the NYSE/DJIA/S&P 500 Indices is typical of huge cyclic tops and bottoms in markets and we are at or rapidly approaching the final  top(s) and it is coming to an end.  The NYSE Composite Index has a major downtrend coming after Oct/Dec 2005 thru March/April 2006 with possible bear rally sometime forming a minor top in mid to late -2007. There is a significant predicted (long term drop of > 30%) downtrend predicted for the NYSE Weekly Index (following a top in Oct 2005 and another in early 2008 thru a bottom in 2009) – the current situation is similar to the FY2000 NASDAQ/1987 crashes. This NYSE analysis does not yet match up with an absolute (earlier) predicted low for the DJIA which is currently centered on July 2008 and with its predicted major tops (one in May 2010 and the other in Sept 2011) – so there is more work to be done in all Indices. If the Fed/BIS is going to “paper over” this problem, they appear to be behind the “power curve” but we may soon see if there is a white rabbit left in the hat (lately a lot of grey looking rabbits are showing up).

We may be in the beginning stages of the 16 to 18-year (K-Wave) down cycle (began in 2002). This was accounted for in the predictions as a small (but growing) effect. Our financial lives have probably already been planned-out through 2012+ and a long-range plan in place thru 2030+. You are expected to buy the hype going into the Chinese Olympics of 2008 about the great world economy - or perhaps you will be getting out early and often. Perhaps you may see a real Mayan Bear by August 2007.

Hypotheses: Seven major cycles in virtually all the worlds’ major indices/commodities determine our financial lives far into the future (and have for many decades) – along with Central Banking controls of the rate of worldwide money supply (and a total lack of fiscal money management by Congress). We are in the process of moving to four major fiat (regional) currencies which may merge into one worldwide currency beyond 2013. There is predicted wild volatility in the world markets for the next seven years but watch out for Nov 2005 thru April 2006 and August 2007 thru late 2008. Perhaps we can print another 10 trillion dollars in the next three or four years and get the rest of the world to cart off this paper to mitigate downside NYSE “market events” thru 2008-2009. The FED/BIS need to do something “big” (in conjunction with Us Government) by July 2006 (possible tipping point) to get this situation turned around heading into 2009 (a lot of ifs here). The US Government has an unbelievable track record so far in printing money and getting the world to take its “full faith and credit “ promises so there still maybe some mitigation coming – so how are you coming with your gold/silver coin and stock purchases? Remember the real bottom in gold may not come until Oct/Nov 2006 but after that we should get a nice four to seven-year party in “precious metals” while certain fiat currencies (which shall remain nameless) continue to drop.  Stick around, after a commercial break the Fed and US Government are going to crank it up another notch - BAM (see July 2006 and August 2007).

Mega Storm are probably approaching in mid to late 2006 and it may go on for the next decade.

For the past several weeks we have been traveling including a California trip by all our family to see my mother who is now 87. She has lived in Coronado since 1939 and the Navy has always been her life. She worked at North Island NAS (Coronado) for many years after WWII. Thanks to all those women and men who have served in our military over the years (and to all who have lost loved ones in combat) and continue to do at the request of Congress protecting our freedoms. We have a military presence around the world (at an enormous taxpayer cost) – so what is all this talk about the US cannot retreat into isolation!?

In Panama City, Fl there appears to be a leveling of condo prices but new home construction continues strong. There are no longer any “starter home prices” in Bay County (median price hit $220,000+ last month). This has far-reaching consequences for military bases and military family housing which DOD/Congress will need to keep addressing.

In the past ten years, we have seen an enormous expansion of fiat money/credit for the US population on an incredible scale – it may never be matched again as interest rates approached zero and banks gave away “interest only mortgages”. During this period, the auto makers pushed strongly for the sale of large SUVs (haul more payloads over rugged terrain or broken roads) without any Government objections and it also enabled sub-prime lending and resulted in many second home owners (alternative housing). It enabled a wider dispersion of the US population from cities as well as rebuilding infrastructure in downtown cities.  Since there is always a hidden agenda in Washington, what do they know they are not telling us (just wondering)?

We are in the midst of a coming “Generational Change for the US” and the consequences will be far-reaching. The Government could not print enough money to keep all its promises to future Generations and Congress is in denial that tax rates will be 70% and Social Security benefits will eventually be cut in half. Now what are you planning to do about rising medical costs – how about training Asian doctors by the millions?

© 2005 Dr. Stephen Rinehart
Editorial Archive

CONTACT INFORMATION
Dr. Stephen Rinehart
Lynn Haven, FL USA
Email

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.