SP Gann Anal-ysis
317 replies to this topic
Posted 27 December 2003 - 11:01 AM
2003 Year of the "dumb luck investor"
From Rich Calkins of Moneyflow.com:
"2003 was the year that dumb luck fund investing
strategies triumphed. Example #1: Those who rode the
bear market all the way down, having never sold.
Example #2: Those who socked away money in mutual
funds month after month. Example #3: Those who
didn't pay much attention to which funds they bought
(since most everything went up in value). Example #4:
Those who followed a "system" that is almost always
Yes, for 2003, the market is poised to go out with one
of the most spectacular percentage gains ever. Of
course, at the beginning of the year, we didn't know
that the dumb luck strategies would triumph. As
usual, year-end always brings wonderful hindsight."
I too lament not having participated more on the long side in this year of the "bull market in everything" or as Rich Calkins is calling it ,"the year of the dumb luck investor." But we have gained very respectable profits with our CubeTrader and Gold Fund trading. My individual stock performance has been positive but only because of some good trades in miners. My bearish bias to short stocks(non-miners) at any sign of market weakness did not pay. I know enough to limit losses so I did not loose that much trying to be bearish in a "bullish" environment. This is not good trading, I am the first to admit...always go with the IT trend and pick from the leading sectors. But Capital Stool is home of the skeptical and bearish. It has been a very difficult year for the bears and once again just as during the 1999-2000 "ultimate boner run," those holding such views are starting to be persecuted and censored.
Below is my year end review Spyders chart.
As March put in a triple bottom with bullish divergences, the signals to go long were numerous(green shaded area). It was a technical no brainer. However after the decline out of the first ascending wedge in mid-May I exited all long positions and since then I have not traded individual stocks much and only have tried some shorting without much success. The market found support at the .618 extension and 200 day MA and literally shot upwards with huge volume spike in June(blue shaded area). It then consolidated finding support at the 1.0 extension and 50 day MA. Since then the action has been viewed as another ascending wedge which has now reached the 1.618 extension with a strong thrust and possible "throw-over." The .382 retracement of the entire decline since March 2000 top has also been overcome. A simple system with 20(blue):50(red) day MA cross-over would have kept you long all the way from April and still have you long!!! As many have noticed, any challenge of the 50 day MA gets "stick jammed" and up we go just like clockwork or should we say PPT-work???
So here we are, in another area of substantial resistance which includes the March 2001 spike low. Market internals remain bullish(NH-NL, BPI,MasterOSC,Summation index and others). Sentiment and volatility measures seem to have become corrupted and of no technical value; all would have you out of this market back in summer. So as we enter 2004, I am going to try to maintain a more balanced...ANYTHING is possible attitude although my little "beardevil" will always be on my shoulder whispering in my ear! I must never again underestimate the power of the 4-year cycle AND the MATRIX ability to stimulate the markets and economies of the entire world. The current US economy has been on a consumer credit binge with housing and auto markets booming. Doc's MoGauge and Feedometer are showing distinct signs of deterioration. But I am NEVER AGAIN going to underestimate the powers mentioned above to manipulate. The recent move by the Bank of Japan is another example of the incredible power of the CBers to intervene in the currency and credit markets,a strong rebound in the dollar with continued stability in the equity and bond markets would suffice to keep 2004 afloat even with some softening of the consumer credit extravaganza and a steady but not stellar economy. The total collapse scenario ala HyperCat is possible but I believe many systemic breakdowns and a huge surge of personal and business bankruptcies need to become evident for it to materialize.
My New Year's trading resolution is reaffirmation of the old trader's axiom not to pick tops but to trade the IT trend. Until the 20 day MA is below the 50 day MA and topping patterns are everywhere, I WILL NOT SHORT. Furthermore, I will not short aggressively until the 200 day MA is once again above us.
Best of success to all stoolies in 2004 as we continue to live in interesting times!
Posted 27 December 2003 - 07:40 PM
Hanky-Well done and well presented- a tip of the cap to you! my plans for 04 are very similar to yours-Trade safe!
Posted 27 December 2003 - 09:48 PM
Thankyou for such kind words. I feel very fortunate to have discovered CS this year and now enjoying the benefits of the awesome collective mind and soul of so many wonderful, informed, talented, expressive, and witty individuals. All seeking the real truth and trying to help each other find it and take proper measures to protect ones well-being, financial and otherwise.
My hat is tipped to Doc and all!
May we all have a safe, healthy, and prosperous 2004!
Posted 28 December 2003 - 06:16 PM
Following up on my statement:
"I must never again underestimate the power of the 4-year cycle AND the MATRIX ability to stimulate the markets and economies of the entire world.
This is one of my favorite charts exhibiting the 4-yr cycle. It is now well accepted that Oct 2002 was the last 4-yr cycle bottom. So the next cycle top of perfect periodicity would be 24 mos from the low or Oct this year, 2004. In bear markets, cycles have a strong tendency to translate to left (reach their peak early) Historically, shortened four year cycles rarely have completed in less than 40 months, that would put the earliest top sometime this summer. I would be very surprised to see any large, sustained sell off or solid technical return of the bear market until at least then. Even a sideways market this year will serve to keep most investors on board and the attitude of Americans optimistic. As the chart reveals, often there has been a second rally leg during the second up-phase of the 4-yr cycles during the last secular bear market. This makes a further advance of SP over 1100 and the Dow to over 11,000 probable. Zoran gives good reason to call this Dow rally the final W5 and concedes it could well form a double top!
Also, something else I feel quite confident in projecting, is that our economy will continue to be "OK" and perhaps surprise us on its strength for most of 2004 (in the absence of any horrific terrorist or natural disaster, of course). Applying the "its the economy stupid" presidential election theory, Bush will serve another term. The extreme historical measures taken to re-liquify the global economy may well extend its positive influences for quite some time before triggering any significant systemic breakdown.
Posted 28 December 2003 - 06:52 PM
Really enjoy your analytical work. I would be careful about applying the four-year to a post-bubble stock market, though. Tell me if you agree with the following cycle count. If so, you will agree that the 1932 bottom would have been a real shock to cycle anal cysts of the time...
Posted 28 December 2003 - 10:43 PM
The 4-year cycle was the major reason that I flipped from short to long in mid-2002 (too early, but losses on longs were recovered during the Spring 2003 up move). This cycle has been very clear for decades.
The left translation of the 4-year cycle was very apparent in year 2000 -- contrary to most 4-year cycles, the Dow peaked 11 months before the election.
Although trough-to-trough counting is more traditional, on a peak-to-peak basis the 4-year anniversary of the Dow's 14 Jan 2000 peak is less than 3 weeks away. Whether this is enough to trump the fact that the upmove from Oct. 2002 has been a very short 15 months, I don't know.
At the right side of Stained Jeans's chart, you can see perhaps the shortest 4-year cycle upmove of the 20th century. The Dow bottomed at 98.95 on 31 Mar 1938, and crested less than 8 months later at 158.41 on 12 Nov 1938 -- the same year. That level was not exceeded in 1939 (the bear market rally carried back to 155.92 on 12 Sep 1939). The 4-year cycle low was recorded at 92.92 on 28 Apr 1942 -- a nearly perfect 49 months after the March 1938 4-year cycle low.
Arguably, the 60% rally of 1938 qualified as a 4-year cycle peak by virtue of its magnitude, if not its duration. The S&P is up only 38% in the nearly 15 months since its Oct. 2002 bottom, so we're short on both magnitude AND duration here.
All that we can really fall back on, besides the approaching 4-year anniversary of the Dow's peak, is the massive overvaluation -- e.g., S&P P/E ratio in the mid-30s -- which was not seen at any other 4-year cycle peak besides year 2000. The intensity of the mania seems capable of overriding ordinary cyclical relationships -- in both directions.
"GOLD -- it's not just for misers anymore."
"Dollahs -- fire-starters for the K-wave winter." - Drano
"Three humps and a dump." - anotherone, 21 SEP 2004
"No gold was harmed in the making of this movie." - Bizarro Greenspan
[i]"Da Track. Da place where Morons bet on Animals Controlled by Criminals." - our jickiss
Posted 28 December 2003 - 11:59 PM
There is, of course, a whole lot more than just a 4-year cycle involved. That is but one duration, though the most used and abused. I look at the chart and see multiple duration cycles at work as I would expect.
Focusing on one cycle duration without considering the miriad of the rest of the spectrum is a monotonous chore indeed.
Anthony caused pearls to be dissolved in wine to drink the health of Cleopatra; Sir Richard Whittington was as foolishly magnificent in an entertainment to King Henry V; and Sir Thomas Gresham drank a diamond, dissolved in wine, to the health of Queen Elizabeth, when she opened the Royal Exchange; but the breakfast of this roguish Dutchman was as splendid as either. He had an advantage, too, over his wasteful predecessors: their gems did not improve the taste or the wholesomeness of their wine, while his tulip was quite delicious with his red herring.here
Posted 29 December 2003 - 11:27 AM
Thankyou all for your contributions and perspectives on the 4-yr cycle.
Goldmember has pointed out the precarious nature of just focusing on one cycle and ignoring the complex interactions that occur in the real world of multiple cyclic components of various periods and magnitudes or what Hurst refers to as his summation principle. Hurst also makes it clear, the longer duration cycles have greater magnitude and a larger influence. The only long term cycle greater than 4 years I know of that is well documented is the 26 year cycle. Hurst lists a 9 and 18 year principle nominal cycles which are documented by Martin Pring. And then there is the Kondratieff Long Wave considered to be around 55 years long. On top of that, place the decennial cycle and presidential cycle.
Now tell me that anyone can with any degree of predictability construct a method of filtering,analyzing, remixing and projecting ALL of the interactions of these with any predictability and I will be the first to kiss his feet as master of the universe! I have tried and I posted a while back(reposted it below) a composite of 2 decennial and 5 presidential cycles. It did identify many IT turns in the market. But there were many times things went in opposite directions. The reason I choose the 4-yr cycle to put primary trading emphasis on is the more direct and predictable relationship it has with the economy, that is the 4-yr business or Kichin cycle. If a recession occurs, it comes right along with the 4-yr cycle lows and cyclic stocks follow right along as does the general market to a lesser or greater degree depending on the other LT cycles. The 4-yr cycle is the most reliable and predictable. And being a longer duration cycle always has the magnitude to turn the markets. Sure it pulls a few jokes on us with inversions(very rare, only 2 this century I am aware of) and variance (but large deviances from the norm are fairly rare.) Walter Bressert has the most complete analysis and table of all the 4 year cycle statistics for the past 100 years somewhere on his website. I had it here somewhere. Have to get it again. Very interesting and useful.
Yes, it is not a good idea to go long or go short like a robot every 24 months but if other technical features confirm a turn close to a 4-yr cycle top or bottom, that what trading is about. We just had this happen and initially I jumped on the opportunity but got cold feet much too quickly and ignored the power of the 4 year cycle.
Pring is very exact and actually gives the average 4-yr period a 40.68 month length!
So 20 months added to Oct 2002 puts us in June 2004 for a top.
I will be looking for a major top in this timeframe. Early would be March...later would be in Fall sometime. Although I see some reasons for some sort of decline soon, I will be looking for another rally or sideways market to extend into at least March and probably June.
I kept a bearish bias much too long after things had obviously turned. Not good for a trader. But I am still learning after 13 years of trading which had the benefit of the big bull helping me do well during most of it (I never shorted stocks until 2001).
I will try to get the WB table and post it for all of us.
He has better statistics on the translations and actually gave a high probability the top to come in early (OCT-NOV 2003). I will get the details and post it.
Best wishes to all,
Posted 29 December 2003 - 12:08 PM
Currently the 4-yr cycle is in its final up-phase.
The 9-mo cycle is just now turning UP.
54-TD cycle heading down.
These are the cycles I use for IT trading.
I also subscribe to Doc's work and follow it closely.
WARNING: I am a cycle neophyte!
Here is Walter Bressert's 4-yr cycle report (but not the latest update, you can get that on his website free also):
From his latest update(he tracks 20 week cycle closely too) he projected a potential high in 1050-1080 range in Oct-Nov 2003 with this caveat:
"Price: Our analysis indicates the cycle high is most likely to occur in the 1050 - 1080 price range. However, a Friday close above 1080 would signal the beginning of a blow off that could take prices to 1130."
It looks like the blow off is in progress and the high will come in later!
Posted 30 December 2003 - 08:08 AM
Posted 30 December 2003 - 08:18 PM
Posted 30 December 2003 - 09:18 PM
Well, "we" are not amused.
Posted 31 December 2003 - 03:52 AM
Sorry, but I don't get your point???
I don't mean to imply "we" means anyone other than myself and not that my
trading system is in any way some de facto standard around here and others
follow it much less actually risk anything using it.
Anyway, I think I am about to take down my site and stop posting,
much easier to just watch from a distance!
Have a joyous New Year!
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