Market Analysis without the Wall Street Hope and Hype

My Purpose

The purpose of this site is to provide investors with a place where they can obtain truthful, non biased, factual information about the financial markets. My primary focus is on the stock market, specifically the Dow Jones Industrial Average, the S&P 500, the Gold market, the Dollar, T-Bonds and even Oil. The information presented in this site is based on technical analysis.   It is not based on the Hope and Hype heard by the so-called mainstream "analysts." 

My Record

In the Summer of 2001, with the Industrials well above 10,000, I did a research paper that suggested with almost certainty we were about to see a major decline take place in the stock market.  Based on history,  my study suggested a 100% probability of a move below the 1998 4-year cycle lows as the market moved down into the 2002 4-year cycle low.  This did in fact occur as the 2002 4-year cycle lows were made in not only the Industrials, but also the S&P 500, the Dow Jones Utility Average, the Dow Jones Transportation Average,  the New York Composite Index, the Russell 1000 and the Wilshire 5000.  In my research paper I specifically said that the Dow Jones Industrial Average would  close below 7,400 in the Fall of 2002. This documentation was published in the November 2001 issue of Technical Analysis of Stocks and Commodities Magazine.  If you would like a copy of this article, please make an e-mail request.

In July 2001 I said the Dow Jones Industrial Average would close below 7,400 in the Fall of 2002.  Again, This was published in the November 2001 issue of Technical Analysis of Stocks and Commodities Magazine.

In both my April and May 2002 newsletters I warned that we had a 97% probability, based on history, that the stock market was about to move below the September 2001 lows, which again was proven correct.   

In the May 2002 newsletter I warned that I felt the seasonal cycle in the U.S. Dollar had occurred as well as the 4-year cycle top.  I further warned that based on my studies of cycles we had a 100% probability of a move below 111 in the U.S. Dollar.  Again, this obviously proved to be correct. 

In the June 2002 newsletter I stated, "we are about to see the bear market accelerate."  This obviously happened as well.

In the July 2002 newsletter I said "If you are still long stocks I would GET OUT."  This was a timely call as well.

In the October 2002 newsletter I said "Expect the Bear to get Nasty again as the Dow moves into the 4-year cycle low, due between November 15, 2002 and January 17, 2003. This low should take the Dow below 7,400 and most likely into the mid 6000 range!" 

We got the close below 7,400.  October 2002 did mark the 4-year cycle bottom, but the mid 6000 range was not seen. 

I have also developed a very unique indicator that has become the cornerstone of my analysis in regard to market turns.  I call this indicator the "Cycle Turn Indicator."  It was originally developed to help identify the 10 and 22-week cycle tops and bottoms in the stock market and it works great.  I then found that it works on other markets and even other timeframes.  Throughout 2006 and 2007  I used statistical analysis along with my Cycle Turn Indicator to warn my subscribers that the 4-year cycle low had not occurred, that "the 4-year cycle was extending and that the fallout was still ahead."  In October 2007 I had a long-term cyclical sell on equities and by November 2007 the Dow theory had confirmed a bearish Primary Trend change, all of which was published in the newsletter and in the short-term updates.  I also called the housing top using statistics and the Cycle Turn Indicator in 2005.  These same methods were also used to call the low seen in the dollar in early 2008.    As commodities approached their tops in July 2008 I warned that they were in parabolic advances and in mid-July issued a sell signal, based upon these statistics and the Cycle Turn Indicator, right when everyone was calling for $200 oil.  In fact, I told my subscribers for months in advance that the dollar was bottoming and that the entire commodity complex was in "a parabolic advance" and that parabolic advances were "ending moves."  I also gave statistical benchmarks to watch for in regard to this the top in commodities 6 months in advance and in July those benchmarks were seen exactly as the statistics suggested.   Again, it was the use of statistical analysis and the Cycle Turn Indicator that confirmed the July top right when many others were calling for $200 oil.  My methods told me that a major top had occurred and this too has since proven correct.   I also issued a sell signal on gold in mid-July warning subscribers of the decline.   Then, as gold approached the September lows I told subscribers that an intermediate-term cycle low was due.  The statistics and the Cycle Turn Indicator have proven to be extremely valuable tools over the years. 

Yes, I Called for a 1930's Style Decline for Equities in 2008 Before it Happened

Here are a few quotes from the commentary section of recent Research letters.  Understand that the detailed analysis and charts have not been included here.  Also, what you see below is only representative of portions of the commentary section on equities. 

June 2008:

"In accordance to classical Dow theory, the longer-term bearish primary trend change that was confirmed on November 21, 2007 still remains intact. From a cyclical perspective, I continue to believe that the January 22, 2008 low most likely marked the 4-year cycle low. We are also now approaching an extremely important statistical hurdle for the equity markets and if higher prices aren’t seen after July, then the statistical implications turn very very bearish. So much so that such a failure would be suggestive that the 4-year cycle top may have already been made.....Should the decline into the coming trading and 22-week cycle low violate the January low, which statistically should not happen just yet, then it could be that the 4-year cycle advance has failed sooner rather than later. The price action over the next couple of months is statistically extremely important and has far reaching implications...."

"I want to add that if the market were allowed to fully exhaust what I belief was the beginning to a bear market back in 2000, we would now be coming out of that bear market. Instead, this bull market has been extended and as a result, we have an old and fragile bull market potentially still intact, at least this was the case as of the October 2007 top, and we still have a huge bear market to deal with...."

"Ultimately, I always follow my statistics while allowing my cyclical work and my ever so important Cycle Turn Indictor to guide me. But, as I look at this overall setup I can’t help but draw conclusions or expectations in regard to what I THINK may be happening. The key is not to get married to what you think and to allow the statistics, cycles and the CTI to guide you and to either prove or disprove your longer-term views.

That being said, I want to give you my current longer-term perspective on how I think things may now be lining up. In doing so I want to first state that just as I have said all along, I believe that when the equity markets peaked in 2000 we entered into a long-term secular bear market that marked what I believe was or should have been the natural top for the bull market run from the 1974 bottom. But, the powers that be wanted to "help." So, they began to "manage" the economy. In doing so, they were able to manipulate public confidence enough to pull the equity market out of the grip of the bear. However, as I have also been saying all along, these efforts would only serve to make matters much worse in the end. Well, in the wake this financial experiment the equity markets were revived, a housing bubble was created and we all know the ongoing consequences of that. Also as a result of the irresponsible inflationary manipulative efforts of the "geniuses" in charge of this financial experiment and manipulation of public confidence, they added fuel to the longer-term commodity cycles that naturally bottomed in and around the 2000 to 2001 timeframe. But, in addition to that all of the hot money around the world has jumped on the speculative bandwagon with commodities as well. As a result, we have commodity cycles that were moving up naturally, but their advances have been exaggerated. The extreme we are seeing in commodities is just like the tech bubble and the recent housing bubble, which Greenspan denied existed. I believe that we now have a commodity bubble that will ultimately end the same way and because of the pain that rising commodity prices have placed on the economy, there is a very good chance that the stock market is setting up for an implosion as well.

Rather than "taking the medicine" back in the early 2000’s the Fed chose to "fix" things, but in reality things are now much much worse. The housing market will not recover for years to come. The banking crisis that has resulted from the fallout of the housing bubble is not over. We now have commodity prices hitting the consumer very very hard and we have a very mature and fragile bull market that is now some 33 years old. This is a much worse situation than we had when equities turned down from the 2000 top and any further efforts at this time, should they continue to be effective, would only make matters even worse. Basically, I think we have hit or at the very least are nearing the point in which any further efforts to "manage" the economy and to manipulate the public’s confidence will not work and will be followed by total financial disaster.

I think that there is a reasonable chance that commodities will top within the parameters discussed above and if so that bubble will soon burst just like tech and housing did. As widespread as the exposure appears to be on the long side of commodities any such top would likely have serious financial implications, just like housing did. On top of that I think there is a reasonable chance that we are setting up with a left-translated 4-year cycle in the equity markets, which is pretty much a direct result of the pain inflicted on the economy by rising commodity prices and the monkeying around with the economic cycles. If so, the end result will be that all of the manipulative and mind controlling efforts seen since 2001 will in fact no longer matter. If so, we will move into a long and contracted bear market that will run some one-third the duration of the great bull market advance that began in 1974.

If such a scenario should occur, then the equity markets will be at great risk of making the 4-year cycle top within the *** month mark, which is ***. But, nearer term the equity market is at risk of that 4-year cycle top occurring along with the coming ***cycle top, which is ideally due no later ***. The bottom line is that should the current 4-year cycle advance top out in *** or less, then statistically speaking we should expect to see the Industrials down in the *,200 range and possibly even lower as the next 4-year cycle bottoms...."

July 2008:

"Long-term, the Dow theory bearish primary-trend change that was confirmed on November 21, 2007 still remains intact...."

"There were some, who do not truly understand the Dow theory, suggesting that the primary trend turned up in April when both the Transports and the Industrials moved above their February highs. I stated then that this was not correct and with the recent price decline there should be no doubt that my assessment of the Dow theory was in fact correct.

According to classical Dow theory, in order to turn the primary trend back up, we must have a joint move above the previous secondary high points. I have stated all along that the January/March lows marked the last secondary low point and that the February highs did not qualify as having marked a secondary high point. Therefore, the move above the February highs were of no consequence from a Dow theory perspective. The current Dow theory chart can be found at the top of page 3.

I have also maintained that the secondary high point would occur in conjunction with the intermediate-term peak, which was anticipated and confirmed to have occurred in May on the Industrials and in June on the Transports. In order to nullify the existing primary bearish trend, once the coming secondary low points are established we will then have to see a daily close by the Industrials above their May closing high and by the Transports above their June closing high. Should this occur, we will then at that time have a bullish primary trend established, which will serve to keep the longer-term bull market that began in 1974 alive. It is erroneous to think that both averages will have to move above their all time highs in order to establish a bullish primary trend. It is price movement above and below previous secondary high and low points that is critical.

Failure of the averages to close above their recent May/June closing highs as the rally out of the now due secondary low points begin would constitute a failed rally that would then be expected to move even lower. Should this occur, the existing primary bearish trend would be reconfirmed with a daily close back below the secondary low points that are now being established. This would then in turn suggest that the bull market, which began in 1974, may have come to an end and that we now have THE bull market top in place. If that proves to be the case as we move forward, then the bottom of the bear market would not be expected until ***. It is for these reasons that the developments over the next couple of months are so important...."

August 2008:

"Long-term, the Dow theory bearish primary-trend change that was confirmed on November 21, 2007 still remains intact.... From a long-term cyclical perspective we must continue to operate under the assumption that the 4-year cycle low occurred at the January/March lows. Reason being, that low occurred first and we do not yet have sufficient evidence to prove otherwise. Understand that if the 4-year cycle low did in fact occur at the January/March lows then we now have a failed 4-year cycle in place and the only other cyclical setup like this I can point to occurred in 1930...."

"A break below the July 15^th low would be indicative that we have a very left-translated and a failed 22-week cycle in place. This would then set the 1930 cyclical setup into motion...."

"According to classical Dow theory, the primary bearish trend change that occurred on November 21, 2007 still remains intact. The current Dow theory chart can be found at the top of page 3. More recently, as the averages advanced out of the January/March secondary low points and into their May/June secondary high points an upside non-confirmation was born. From those highs the averages declined down into the recent July lows. It is my belief that these lows should ultimately prove to be lows of secondary degree. I say this because I have found that secondary low points in accordance with Dow theory tend to correspond with 22-week cycle lows. For clarification, please understand cycles have nothing to do with Dow theory. Nonetheless, given that the July lows marked the most recent 22-week cycle low this should have corresponded with having marked secondary low points in accordance with Dow theory.

Now, just as with cycles, the test now at hand is how far the rally out of these secondary lows goes. If the averages should muster up enough of a rally to carry them above their May/June secondary high points, then the primary bearish trend change would be reversed as we would then have a primary bullish trend change. This would also point toward the July lows as having marked the 4-year cycle low. In which case, the Dow theory, statistical and cyclical implications all turn much more bullish. However, failure of the averages to better their previous secondary high points, followed by another intermediate-term sell signal, per the weekly Cycle Turn Indicator, then the primary bearish trend will remain intact and the stage would be set for yet more weakness. Then, any violation of the July lows would serve to reconfirm the November 21, 2007 primary bearish trend change. This would also tend to point toward the January/March lows as having marked the 4-year cycle lows. This would also suggest that we now have a failed 4-year cycle at play, which would be a very similar setup to 1930."

"There is a reasonably good chance that January marked the 4-year cycle low and that we now have a very left-translated 4-year cycle at play. In fact, when I look at the balance of the evidence it tends to tip the scales slightly in this direction. If this is in fact what we are facing, the last time a similar setup occurred was 1930. In that case the 4-year cycle advanced 5 months and retraced some 49% of the decline out of the 1929 4-year cycle top. That 5-month advance also consisted of one and a half intermediate-term 22-week cycles up. Then, once the 4-year cycle turned down the initial decline into the first 22-week cycle low after the top held above the 1929 4-year cycle low. The market then bounced and the crash was in full swing. The overall decline from the 1930 4-year cycle top was 86%.

Assuming that the January low marked the most recent 4-year cycle low, the advance into the May 4-year cycle top only lasted 4 months, but retraced some 58% of the decline out of the 4-year cycle high. But, structurally this setup could be much weaker because there was only a single 22-week cycle advance out of the January low and now with the decline out of that top the previous 22-week cycle low, which potentially was also the 4-year cycle low, has been violated. If this is in fact what we are dealing with, I can tell you that since the inception of the Dow Jones Industrial Average in 1896 there has never been a cyclical structure this bearish. It is because this is such a potentially extreme setup that I feel we must be very cautious in terms of the potential economic destruction we could be facing..."

March 2009

Based upon the current phasing of the market, there should still be at least one additional leg down into the March trading cycle low. As explained in the Bottom Line section at the
beginning of this newsletter, the coming trading cycle low will mark the first of two opportunities for the intermediate-term low. All we have to do is watch the developments surrounding the trading cycle low to see if it further evolves into marking the intermediate-term low or, if it shows signs of failure and in this case there will be another leg down into the May timeframe, which should finally mark the intermediate-term cycle low. The important thing for you to keep in mind here is that once the intermediate-term low
is made, we should then see a more meaningful bounce in the stock market. Reason being, the coming intermediate-term low should ideally also mark the seasonal cycle low. Given that the last seasonal cycle low occurred in January 2008, the rally out of the coming seasonal cycle low should be more in the order of what was seen between January 2008 and May 2008. But, this rally should still ultimately prove to be a bear market rally. However, because of the potential magnitude of that rally it is not something I would be willing to sit on my shorts through. In fact, the advance out of the seasonal cycle low should be a much more meaningful trading event than what was seen out of the November 2008
low.

April 2009

...based on current evidence, it appears that the more recent March 6th low likely marked a slightly early 22-week cycle low, that any weakness should hold above the March 6th low and should mark a buying opportunity. I also suspect that the March low marked the seasonal cycle low was well. If so, this means that the March low was one degree higher than just the intermediate-term 22-week cycle low and as a result this sets the stage for the rally to have a bit more staying power. Based on the overall cyclical picture, we now have the opportunity for a multi-month rally. Whether or not the market can capitalize on this cyclical opportunity is the question. Stay tuned to the short-term updates
for developments.

The price action the week of March 13, 2009 completed the formation of a weekly swing low that was confirmed by an upturn of the weekly Cycle Turn Indicator the following week.  As a result, an intermediate-term buy signal was triggered. Until evidence to the contrary develops, we must continue to operate under the assumption that the March low marked the most recent intermediate-term cycle low.

I Also Called the Parabolic Top and Forecasted the 2008 Decline in Commodities 

Here are a few quotes from the commentary section of recent Research letters.  Understand that the detailed analysis and charts have not been included here.  Also, what you see below is only representative of portions of the commentary section on equities. 

"These are parabolic advances that have been driven by speculation. Such advances are NOT sustainable. This is not to say that the parabolic advance can’t still push higher, because it certainly can and I want to make it perfectly clear that at present I do not have any indication that a top has been seen. But, what I’m telling you is that like housing, this too, is a bubble and it will burst...."

"Now let’s review the statistic I have been watching. There have been four 3-year cycles in the CRB that have topped out in *** months or less and 100% of those cycles moved below the previous 3-year cycle low. Also, all four of these 3-year cycles were associated with major long-term tops in the CRB and the underlying commodity complex. With the last 3-year cycle low occurring in ***,  *** marks the **^th month for this cycle. Thus far, the price highs have occurred in July. Again, the key will be whether or not the bounce out of these intermediate-term oversold levels betters the July highs after the last trading day of ***. If not, then we should have a major top in place...."

My Long Term Forecast on Equities

Because of record bullishness and manipulative efforts to keep air in the bubble, the 4-year cycle advance out of the 2002 low was stretch.  In fact, the cycle that began in October 2002 and that ended in January 2008 was one of the longest cycles in stock market history.   In my work with the 4-year cycle there are two distinctly different data sets.  One, provides me with statistical norms and averages surrounding the 4-year cycle.  This data gives us a "yard stick" with which we can measure current cycles and the expectation of future cycles.   Secondly, I have a number of very specific "markers" that are used to identify 4-year cycle lows.  In fact, most of these markers have been present at every 4-year cycle low since 1896.  One of the many important aspects of these markers is that they tell me when the 4-year cycle has topped and when the 4-year cycle has bottomed.  Many erroneously proclaimed that the June/July 2006 lows or that the March 2007 low marked the 4-year cycle low.  None of the historical markers that have occurred at previous 4-year cycle lows were present at either of these lows.  Thus, all indications were that the 4-year cycle advance out of the 2002 low did not bottom in either 2006 or 2007 and my subscribers were very aware of this fact.  As a result, this made the 2002 to 2008 cycle among the longest cycles ever.   As an example, since 1896 there have been 27 completed 4-year cycles.  The average duration of these 27 cycles has been 47 months.  Of these 27 cycles, 13 have extended beyond 47 months.  This makes sense in that half of the cycles have extended beyond the 47 month average and half have been shorter.  Of the 13 cycles that have run longer than the 47 month average, the data reveals that the average duration of these cycles has been 54 months.  From the October 2002 4-year cycle low to the October 2007 high was 60 months.  As of the January 2008 low this cycle had run a total duration of 63 months.  Since 1896 there has only been one other 4-year cycle that has stretched to this duration.   As the equity markets rallied out of the January 2008 low I have been able to call every turn based on my statistical analysis and my Cycle Turn Indictor.  I began telling my subscribers well in advance that we were facing the very real possibility of a "cyclical setup very similar to what was last seen in 1930."  This has now come to fruition and it's not over. 

I also use Dow Theory and I told my subscribers on November 21, 2007 that according to classical Dow Theory the Primary Trend had turned bearish.   My views on this were challenged as the Transports moved to new highs in June 2008.  But, I explained that under orthodox Dow Theory the previously established Primary Trend change that occurred on November 21, 2007 still remained bearish.  This call proved correct and even though we have recently had a trend change, I continue to believe that it is within the context of a much longer-term secular Bearish market.  All of these market calls are well documented in my newsletters.

Do you know anyone else who had documented forecasts one year in advance, warning about the sell-off in the equity markets in 2002?  Did your broker or money manager ever once tell you this was going to happen?  Did the "analysts" on CNBC warn you?  What about the "experts" on Fox or CNN?  I can assure you they did not see this coming.   As for the current situation, I can also assure you that they did not see this top coming either.  However, I did make these calls well in advance.  The week of October 19, 2007 my intermediate-term Cycle Turn Indicator gave a sell on equities.  Then, on November 21,2007 I stated that in accordance with Dow Theory a Primary Bearish Trend change has occurred.  As for commodities, I gave my subscribers a very specific statistical benchmark to watch for in the summer of 2008, which unfolded perfectly.  Did anyone tell you in July that commodities were facing an important top?  Well, I told my subscribers.  When I look at my statistical and cyclical analysis along with the historical bull and bear market relationships, the balance of the evidence suggests that this bear market still has much further to go.  There will be rallies along the way and the cycles, statistics and my Cycle Turn Indicator will guide me at these important turns.   As the market turns up out of these important lows we will hear the mainstream media telling us that the market has bottomed.  Again, these guys did not see the top in equities in 2000 or 2007 or in commodities in 2008, much less the decline that has followed in either case.  So, don't expect them to identify the bottom.   Don't buy their Hype.   We have note seen the bottom.  The rally out of the March 2009 low has been a bear market rally within the context of a much longer-term secular bear market that has not yet run its course.  The Phase II decline is out there and it should be far worse than the Phase I decline was.   I have gone back to the inception of the Dow Jones Industrial Average in 1896 and identified the common traits that have accompanied every major market top.  Thus, I know with a very high probability what this bear market top will look like and how to identify it. 

My Methods

My technical studies are based on my knowledge of both Market Cycles and Dow Theory.  My knowledge of cycles is based on the methods I learned from Walter Bressert.  My knowledge of Dow Theory has come from my studies of the original works of Charles H. Dow, William Peter Hamilton, Robert Rhea, E. George Schaefer, and Richard Russell. If you are familiar with these names you should realize that I believe in the old traditional methods of market analysis.  It is obvious to me that these are the best tools available to market students today. Yet, I find that these tools are overlooked and/or forgotten today when they are most needed.

In short, I use the Dow Theory and the longer-term cycles to paint the longer-term picture.   Cycle analysis is simply a method of analyzing various trends of various degrees.  I then data mining techniques to develop high probability expectation for the future.  Then, I use the intermediate-term and short-term statistics along with the Cycle Turn Indicator to guide me as the longer-term picture unfolds.

These methods were used to call the 2000 top in the stock markets as well as the projections for the 2002 4-year cycle low.  I also identified the top in housing using these methods in 2005.   I continue to use these same methods today.  These methods allowed me to identify the stretched 4-year cycle in the equity markets that finally topped in 2007 as well as what I now believe was the 4-year cycle low in January 2008.   Then, as the equity markets advanced out of the January 2007 lows I was able to warn my subscribers that we were facing a potential 1930's cyclical scenario.   These same statistical methods were also used to call the 2008 low in the dollar as well as the 2008 top in commodities.  This is all documented in my newsletters. 

More current research is available monthly with a subscription to Cycles News & Views.  With a subscription to Cycles News & Views also comes access to my shorter-term market commentary and proprietary turn indicators.  My service is not the average 3 to 5 page newsletter.  It is a very detailed in-depth research document that averages some 20 pages.  Cycles News & Views provides comprehensive research based on Dow theory and trend quantifications, known as cycles, and most importantly the market direction based on my proprietary Cycle Turn Indicator.  

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Last Updated Saturday August 07, 2010