[DrStool]

Good morning! The End emailed me this question.

"Is it plausible that the 18,36 and 72 year cycle lows where hit in Oct. My answer is no but I would appreciate yours in a public forum."

Unfortunately, I am not a student of long waves. Kuznets, Juglar, Kondratieff etc. I had always thought the Kondratieff was a 60 year cycle. I've heard some people mention 54 years. If there are cycles with those nominal lengths, it would seem to me that July 1932 and year end 1974 would be benchmarks. On an inflation adjusted basis perhaps 1982 would be one. The difference between the two benchmarks is either 42 or 50 years. None of the aforementioned cycle lengths would fit in that space in any meaningful way.

Then you have the period from 1974 to 2002, or 1982 to 2002. 28 years and 20 years. These periods again do not fit the nominal periods which The End mentioned.

I think if you look at the current environment, most of us would agree that there has been a bubble, both in stocks, and in the general financial environment that has continued right up until recent weeks. I think it's fair to say that bubbles do not appear in the early stages of any long wave. They come at "The End."

I also doubt that there is any set periodicity for cycles longer than 4 years. The 4 year cycle, or 3-4 year cycle, can clearly be seen, going back 100 years or more. As cycles lengthen the wave band width also widens. For practical trading and investing purposes I think the 4 year cycle is the only one that really matters. What difference does it make if the the secular trend channel on the S&P has turned flat, or even slightly up, if the band width is 300 points, the half cycle crossing period is two years, and the market is currently near the top of the channel?

In my view the market has all but topped out, and the next two years will be bearish. If the secular trend channel is flat, or up slightly, then the market won't break or even get all the way back to the 2002 lows. Another thing to consider is the fact of ever increasing long term volatility. The wave band keeps widening. This rally may have been nothing more than that. If that's the case, then the secular trend might still be heading down. I just don't know. Once the market is one third to halfway through the next down phase, we'll have a much better idea of where the ultimate target is. For now, let's just get this top complete.

Here is the current long term cycle picture as I see it. It is published weekly in the Anals. I invite everyone to support The Stool by subscribing.

I thank The End for his support through the years, and for raising this question, so that those of you who are not subscribers can get a sample of some of Doc's thinking.

And now, On With The Show!

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