Stock Market Cycle Analysis

    by Erik McCurdy

US stocks currently have an average long-term cycle period of about 48 months (4 years), and the following chart displays all of the Long-Term Cycle Lows (LTCLs) since the early 1980s. The 4-year long-term cycle is historically very reliable and LTCLs occurred on schedule for the last 3 decades before the market crash of 2008 resulted in the formation of the latest LTCL much earlier than anticipated in 2009. 
Figure 1

We are 25 months into the right translated cycle following the LTCL in March 2009. The window during which the next LTCL is likely to occur is from September 2012 to February 2013. 
 
Figure 2

Long-term cycle tops and bottoms occur in conjunction with an annual cycle translation change. We are 9 months into the right translated annual cycle following the Annual Cycle Low (ACL) in July 2010. A hanging man candlestick formed this month, suggesting that a reversal has become more likely, and renewed weakness in April would indicate that the latest Annual Cycle High (ACH) occurred in March.
 
Figure 3

While some chart analysts look at Figure 2 and suggest that the current secular decline will terminate after the next cyclical downtrend, it is important to understand that this is not a typical secular bear. Secular bear markets that are accompanied by a long-term deleveraging cycle, like the secular decline accompanying the Great Depression during 1930s and 1940s, tend to have a significantly longer duration, so an extended bear is likely this time as well. This will be the subject of a future article.

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 Erik McCurdy is the senior market technician for Prometheus Market Insight and has been analyzing charts every day for over 15 years. The software program that he developed to monitor long-term stock market trends has correctly predicted over 90% of the long-term turning points in the S&P 500 index since 1940. His Gold Currency Index has predicted every major trend change in the US gold market since its creation in 2005. The Prometheus Market Insight newsletter service provides daily, weekly and monthly forecasts for stocks, bonds, currencies, commodities and precious metals using proven computer models that base their predictions on technical and cycle analysis.  Stay in touch:
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