QUICK LOOK REPORT #13: NYSE Index
by Dr. Stephen Rinehart
November 15, 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 # 13 looks at an update to the daily closings of the NYSE Composite Index from 1988.

The primary seven daily cycles in the NYSE Index are at: 89, 126, 190, 398, 500, 970 and 1416-days (looks similar to S&P 500 and DJIA Daily Indices) and there are seven minor daily cycles at 5, 10, 15, 21, 28, 35 and 52 days. These cycles represent an approximate (within 5%) fit to the amplitude/phasing of the long term daily NYSE Composite Index from 1988 thru Sept 2005. A prior prediction of the NYSE Composite Weekly was made in 2004 (see FSU Archives Rinehart on Magnificent Seven) and in Quick Look Report #6. By looking at the shorter daily cycles we see what types of market “turns” maybe coming up for 2006. We are on record in stating that there is a coming worldwide recession in the making which appears to have the highest probability in a period from late 2006 thru 2008. We also believe there is an end to the current (minor) bull market in the NYSE after Dec 13, 2005!?

This study includes the largest cycle in the NYSE Index daily closings (the 1416-day cycle) and this puppy will form a top in March 2006. Once this and other major long-wave cycle start accelerating downwards (as well as the longer 438-week cycle in the NYSE after Jan 2006) it will take the NYSE Composite down with it. There does not appear to be any significant bull market corrections in the NYSE Daily Index again until after this cycle bottoms in March 2007! 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 2006 based on the daily cycles.

Chart 1 shows a comparison of the (detrended) NYSE Composite Daily Index from 1988 thru 1991. The graph shows the NYSE Composite Daily Index has closely followed these cycles over the years.

Chart 2 shows an example of the four largest daily cycles topping in 1989 for NYSE Daily Index. The chart shows the NYSE Composite Daily Index forms an intermediate top when these cycles come together (not a random event) and is followed by a major downtrend.

Chart 3 shows the four largest daily cycles are again topping in Oct/Nov 2005 for NYSE Composite Daily Index. The chart shows the NYSE Composite Daily Index forms an intermediate top when these cycles come together (not a random event).

Chart 4 shows the prediction for the detrended NYSE Daily Index for 2006 with amplitudes divided by a factor of 10X. The chart shows the NYSE Composite Daily Index has a coming significant downtrend for 2006 with an intermediate bottom in mid-2006 and a possibly continuing downward thru Nov/Dec 2006 before forming a real bottom. The NYSE Weekly Composite Index is predicted to begin a downtrend thru April/May 2006 based on longer term cycles. We have a coming worldwide recession slowly in the making from late 2006 thru 2008. It is highly questionable as to whether the NYSE Composite Index will see another top as high as the ones in 2005 again for almost the next two to three years (possibly until late 2007 or early 2008)!

Chart 5 shows the prediction for the detrended NYSE Daily Index for 2007 with amplitudes divided by a factor of 10X. We may have a short bear rally in the offing from April 2007 thru Sept 2007 but watch out after Dec 2007.

The verdict is not yet in but we could be in the beginning stages of the 16 to 18-year (K-Wave) down cycle (began in 2002). This situation is being aggravated by continuing worldwide natural disasters which are impacting the world economy. In particular, we know very little about the long-term behavior of this planet’s weather systems as well as the Sun’s output.

Summary:

1. Seven major cycles in virtually all the worlds’ indices/commodities determine our financial lives far into the future (and have for many decades) – along with commodities manipulations. These 2-D cycle representations are an approximation to complex fractal patterns in a (M3-controlled) but seemingly chaotic world. If true, this makes all the probability theory which MBAs are taught regarding bell-shaped distributions obsolete as regard market moves as well as grossly underestimating market risk. World markets show significant fractal patterns and long term cycles (with major attempts to manipulate by Central Banks).

2. The NYSE/S&P 500/DJIA Indices are being supported by significant purchases of equities which correlate strongly with M3 variations with phase lags. Somebody is trying hard to support the world equity markets right now. The “acid test” will begin around March/April 2006. The cycle amplitudes have grown significantly (probably due to PPT intervention within the last 12 months) and we may have created a worldwide “MarketStein”. The majority of FY06 appears to be a rough year for US equities (but Asia may do better).

3. We may be in the beginning stages of a 16-18 year down cycle in world markets but much may depend on coming intervention of the Fed who should succeed in making matters worse with M3 money pumping. This situation is being aggravated by continuing worldwide natural disasters possibly coupled with unexpected variations in the Sun’s solar cycle and output. We are having record or near record highs in parts of the country as well as large land storms a developing over the US as witnessed by recent tornado activity in Iowa. Water temperatures of the Pacific Ocean are much higher than we have seen in fifty years and there is a drop in sea life and native birds. We are truly living in some strange times.

© 2005 Dr. Stephen Rinehart
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CONTACT INFORMATION
Dr. Stephen Rinehart
Lynn Haven, FL USA
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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.