|
QUICK
LOOK REPORT #14: S & P 500 Index
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 daily, weekly or monthly with the shortest cycle about 5 to 15). Quick Look Report # 14 looks at an update to the weekly prices of the S&P 500 Weekly Index from 1950. The primary seven weekly cycles in the S&P 500 Weekly Index are: 18, 40, 52, 76, 105, 233, 333. There is also a major long wave cycle around 1400 to 1600 weeks (looks similar to NYSE Weekly Composite Index except no determination can be made about the possible real amplitude of the 33 to 38-year cycle except it would be reaching a top in 2006 if it exists). It appears the prior 176 week and 266 week cycles have resolved into a single wave at a period of about 233-weeks ( (176 + 266)/2 = 221 weeks!?). These large weekly cycles have been the subject of an ongoing investigation discussed in several prior studies over the past eighteen months in the Archives – see Rinehart) in which we flagged this Index as a Code Red going in 2006. For the past ten months the S&P 500 Index has been trading in a narrow range from 1190 to 1246 which has probably left many investors yawning out the coming next moves. We have shown this narrow trading range is in the context of a series of large waves (cycles) forming this broad top which will become very evident in the latter part of 2006 and all the way thru 2009 (possible bear rally in 2007) as the S&P 500 Index begins to drop. It is going to be a major correction – it is slowly starting. It is going to begin to be evident by May 2006 to Wall Street. It is believed the following S&P 500 Index predictions could be in the context of a long term secular bear trend (major cycles topping now) which should be clearly evident by the latter part of 2008 or early 2009. However, some nice secular bear rallies can occur for durations on the order of 6 -9 months could be in the offing over the next ten years (particularly after 2010). There are also some interesting speculations in the last set of charts about the possible end to the growth in the US Equities Markets – plausibility arguments are proffered as to some possibilities if the current waveform persists. Chart 1 show the largest weekly cycles in the S&P 500 Index from 1986 thru 2005. The largest cycle in the S&P 500 Index is a 334 –week cycle or the proverbial seven-year cycle. This cycle is approaching a top (peak around June 2006). After this cycle reaches a top (May/June 2006) the S&P 500 Index has no more upside potential – so the latter half of 2006 is going to get ugly and Dr. Bernanke is going to be busy in the next three years. We have a coming worldwide recession slowly in the making which should be clearly evident around March 2007 and therefore any counter-bear rally may be of limited duration or evident only as a sideways trading pattern. It does not matter who the Fed Chairman is as regards the coming worldwide recession – it is continuing to slowly unfold and Central Banks may be buying gold again while printing some M3. Chart 2 shows the actual seven primary (detrended) weekly cycles in S&P 500 Index from 1986 thru Nov 2005 which represent the primary waveform and action in the current S&P 500 Index. Chart 3 shows the (detrended) predicted waveform for the S&P 500 Index Weekly Closings for 2006 for the primary seven cycles. It shows a series of decreasing peaks after Jan 2006 with a much more significant drop after May 2006 thru Nov/Dec 2006. Chart 4 shows the predicted waveform for the S&P 500 Weekly Index for 2007. It shows a short rally attempt from Dec 2006 thru March 2007 followed by another sharp downside move thru July/Aug 2007. At this point we are continuing to predict this significant bear rally (also in most other Major Indices) in the latter part of 2007 going into 2008. Chart 5 shows the prediction (detrended) for the S&P 500 Weekly Index closing prices for 2008. It shows that there will be a major coming decline in the S&P 500 Index from roughly January 2008 thru 2007. This picture is also emerging in other major indices as well and strongly suggests the total move is a secular bear decline from mid 2006 into 2010 (hey, I’m just the messenger – nobody likes secular bear declines and the majority have not experienced one). Chart 6 shows the overview in the total (detrended) S&P 500 Index waveform from 2006 thru 2010 for the S&P 500 Weekly Index. It now shows we have a major coming multi-year five wave decline in the S&P 500 Index punctuated by a possible sharp bear counter-rally in the second half of 2007. The true bottom of this series of downside moves will not occur until mid to late 2010. The actual downside waveform can have the appearance of being partially mitigated by “devaluations in the USD” but the waveform suggests this may not happen until/after Nov 2007 which could represent the last failed attempt by the Central Banks to bail out the coming worldwide recession. Chart 7 shows the 334-week cycle continuing into the future. This is the proverbial seven-year cycle and it shows two more significant peaks coming with a top in June 2006 and another peak in Aug/Sept 013. If this cycle continues to grow in amplitude (not shown yet on the chart) as we go forward into 2013, the seventh growth cycle (starting in 1973) of the seven-year cycle which is the largest of the Magnificent Seven Cycles will represent the final top in the US Equities Markets in Sept/Oct 2013. It will be fueled by the “Baby Boomers” retirement plans pouring into the Wall Street/World Market Casinos from 2009 thru 2013 and the bottom of the housing market cycle (all those people on the move!). It will be the greatest rally of all time when it starts (late 2009/2010) and it will be impressive beyond all measure. We will be in a true “Peak Energy Crisis” and major resource wars with China who will have become very militant – all types of events could be converging in the 2012/2013 timeframe. After the worldwide crash starts in 2014, the US Equities markets will never be the same and the game will move to Asian markets where the Dragon is King. By late 2016, the existing fiat currencies could well be facing hyper-inflation and a new currency will become the Dragon King. Bottom Line: The second half of 2006 is going to be a turbulent for worldwide markets and for the US Equities markets in particular as the seven largest multi-weeks S&P 500 Index cycles peak and start accelerating down – Fed better get busy and keep those money presses rolling if they know what is good for them and mitigate this mess! The total downside move in the S&P 500 Index from mid-2006 into July 2010 is going to be a major five-wave downside move. The last major tops in the S&P 500 Index (until Nov 2007) will be formed in Jan thru March 2006. There is a possible sharp (bear) rally in mid to late 2007. The peak of the seventh cycle of the largest seven weekly cycles in the S&P 500 Index could will be a significant high-water mark in Wall’s Street’s history and cause a “generational change” in world equity markets (along with looming natural disasters and political turmoil and possible food shortages). The Grand Finale is tentatively scheduled for late 2013. It will be WILD! In May 2006, the motto will be “Let The Games Begin” (in more ways than one). We will continue to track and report on the developing wave fronts in the world’s indices. You just stand right here on this path marked Wall Street while I go off and buy some more gold and silver and natural gas income – not to worry but if you hear something growling later take evasive action immediately if not sooner. Stay tuned, I said we will show you a Mayan Bear one day – but only once in a lifetime will you get to see this Baby Bear and once will be quite enough. Have you heard about the lines at the Mall for XBOX – like in the Days of Noah!
CONTACT
INFORMATION 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. |
