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The worldwide 80-week melt *may* be beginning with the Nikkei now down 545 points. If you look at the $NIKK, $TSE, $FTSE, $CAC, and $DAX, you will see a worldwide absence of an 80-week low. In fact, some exchanges such as the $TSE show virtually no dip at all at the New Year.
That the Hurst analysts would now point to a fundamental cause of the Nikkei melt makes me smile. In my opinion, it was due, and will soon find a reason (fundamental or otherwise) to spread around the globe.
BB
Those interested in the BlissBear perspective might enjoy the following charts:
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=ID1544663
There are some interesting charts of the 1987 crash and the Nikkei breakdown.
Call me neutral with a suspicion that the equivalent of an 80-week low lies in our immediate future (by the 10-week low or sooner).
BB
IYR. (EOM)
If I had seen the pattern of CSCO, SYMC, and DELL in the stocks driving this market higher, I would have immediately agreed the 80-week low is in.
I would also agree that the long pause zone/mild decline in December *could* be the 80-week low in the major indices. However, I also see reasons to suspect that it is not.
What really has my attention is an index such as $TSE that has been following the Hurst cycles to perfection but showed virtually no evidence of even a 5-week low at the New Year. Just now it is hinting that it *may* roll over.
Am I guessing? Of course. But it's high-probability guessing.
:)
BB
I remember November 2003 well. It was quite a different time in the 4-year cycle. Perhaps we are getting a similar effect now with a right-translated peak in the 4-year cycle.
I believe the cycles work by the law of compensation. As it refers to the market, this law states that any gain beyond what is warranted by real value will be met at some point by an equal and opposite move down. A corollary would be this: Any cycle down circumvented by speculation increases the probability of an equal and opposite cycle down. Evidence of this corollary appeared in the markets in December 2004/January 2005.
In November 2003, this corollary was working in the opposite direction. The entire move up from March 2003 through early 2004 was a compensating move to the extremely oversold market conditions. Based on this, the probabilities of an extremely low 40-week low in 2003 were increased.
Currently, the market has has created a situation that increases the probabilities of a large move down.
BB
Chuck: Contact me
at
blackbelt1225@yahoo.com.
Could we say then that cycles are statistical tendencies that predict nothing because the market can override them during any given period?
Is the real benefit of the cycles that they enable us to anticipate likely market moves?
Would any statement concerning future market moves based on cycles be guessing?
BB
Cash, I agree in trading by what the market is actually doing in the present moment. What sparked this whole dialogue is the rather bullish projections concerning the market's future. In response, I shared a divergent opinion, and then you know the dialogue since.
I use the Hurst cycles to anticipate market action and then use the market action to verify actual direction.
I haven't made a firm prediction concerning what happens next. Honestly, I don't know.
Still, it seems a natural tendency even among the best analysts on this board to speculate concerning where the market is going, and I do enjoy that aspect of the game.
I don't trade based on speculations. I do sharpen my wits through the discussion, however.
NOTE TO REBELMAN: I'm not fighting the tape. Just not getting carried away by the bullish sentiment. The discussion keeps me sensitive to the details--and from going to sleep.
TO ANYONE AND EVERYONE TRADING SHORT AT THIS TIME: Just know that you *are* speculating and exit the moment the market proves you wrong. Don't go short here because I have influenced you to do so. If I am correct in my assessment, the market will give plenty of signals and ample time to catch the sweet spot.
I'm not writing here because I'm disappointed by the lack of a significant 80-week low. When I looked over the evidence, I just got cranked by what I was seeing--that the 80-week low or the amplitude of the 80-week low has likely been delayed from when we would normally expect it. It is hard to explain why I'm so cranked on this one, but I feel like I'm plugged into a live wire. If the market does head down in a significant way, I don't want to get a big head over it. I want to understand what happened, what evidence I had, how I knew. If it turns out that I'm dead wrong, I don't want anyone rubbing it in my face either. I may be right and I may be wrong. At least I'm learning from the process.
Chuck, I promise to lay out the evidence I have within the next 24 hours.
BB
BB
Chuck, thanks. I love a lively discussion. Through discussion and interacting with the market, I learn. I learn the best when I take a position in writing, and then see what happens.
Currently, I'm mildly bearish concerning the market between now and the 10-week low. I'm not looking for a crash. I do see a high probability that the effects we would normally associate with a 40-week or 80-week cycle down lie in our immediate future.
I clearly understand that a cycle low of some sort came in January 3, and that we would normally think this was the 80-week nest of lows. The evidence of that is plain to see, and I would have to be stupid to ignore it.
What I'm saying is this: There is a possibility that just as the market powered higher in December 2004 (during weeks 18, 19, and 20 of the 20-week cycle), we may be experiencing the market powering higher prior to a significant dip. The climb up may appear bullish (just as it did in December 2004), but it doesn't necessarily mean that the market will continue to be bullish directly ahead. Just as the market gave back its gains in January 2005 (setting the market back to November 2004), we could experience the market giving back its gains so that by the 5-week low or the 10-week low, the market could be reset to November 2005 or even lower.
If we get a dip that takes the market back to November 2005 (or even lower), I'm saying this will be an amplitude more associated with the anticipated 80-week low. Now if it turns out that I am right, it will still be debated as to what actually happened and why.
In my next post--I need some time and inspiration--I will lay out my case concerning why I think there is a high probability of a significant dip in the near future (by the 10-week low at the latest).
BB
OT: Cash, I wrote that I appreciate the Hurst model anyway. I appreciate far more than that. This is one of the best boards on the net, and I appreciate everyone who has made it so--you, Airedale, USA, PMiles, Chuck, and everyone else who has contributed.
BB
Cash: Airdale has published on this board more than once that the 20-week low came actually came in in December 2004. He has also written that the low in January 2005 was a 5-week cycle down with increased amplitude.
I can see that this discussion is not going to work. Clearly there is a divergence among the Hurst experts as revealed in the published record of this board. That's fine. I appreciate the Hurst model anyway.
All my opinions expressed recently are purely academic unless the market does head down with the amplitude normally associated with a 80-week cycle low. If it actually occurs, we can discuss how and why then.
Even if it were to happen, I see that there would be many alternative explanations (for example, the 4-year cycle down causing increased amplitude). So even if I am right, my opinion will most likely still be disputed.
If anyone is interested in my laying out a complete case now, let me now. Otherwise, I'm crawling back in my hole until I have something interesting to write about. :)
BB
Cash: My question is simple and clear. I'm referring to the 20-week cycle anticipated December 2004. What language would you use to describe what happened then--when the amplitude usually associated with a 20-week low occurred at the following 5-week low in January 2005?
My question is framed using language and assumptions made by Airedale--that the 20-week low actually came in in December 2004 and that the following 5-week low in January 2005 came in with increased amplitude.
An alternative interpretation might be that the 20-week low came in later than expected (January 2005) and that all smaller cycles were reset.
My question is simply this: How do you explain the fact that the market delivered a significant market low substantially later than expected?
Whatever language you use to describe what occurred last year in December 2004/January 2005, I will feed back to you now. I will use the same language to frame my hypothesis that the amplitude normally associated with the 40-week and 80-week low lies in our immediate future (within the next 10 weeks). I am saying there is a real possibility that the full effects will arrive later than expected. Later than what the 5-week and 10-week cycle lows would have suggested because they *were* anticipated in the first week of January 2006.
Before I present my case, however, I want to be extremely clear that there is indeed evidence both in the Airedale literature and in the market record that such events (shall we call it delayed amplitude?) can and does occur.
BB
Bliss, do you see a possibility that 1/16 could be the rollover date when the market could begin a move down into the 5-week low expected early February?
BB
Cash/Airedale: What language would you use to describe the amplitude of the 20-week low appearing at the next 5-week low as it did in January 2005? I'm not asking for a fancy label to categorize the event but a cause-and-effect explanation. And if we simply don't know why it happened, then let's say so. But if it did happen, then there *is* evidence in the cyclical literature (Airedale's posts) and in the actual market record.
I'm not even sure that the two of you agree on what happened last year. If you don't, I see this as an issue with the Hurst system. It leaves so much room for interpretation that we can just make things up as we go along. I'm not sure this latter statement is true, but it is at least a justified criticism leveled by more academic financial advisor types. It is a question that I will continue to bring up when I see that it is warranted, because I love the Hurst cycle system and want to encourage professional-level analysis and communication concerning it.
After the question in the first paragraph has been answered and settled, I will bring up the evidence that I see that suggests the same thing (or similar market event) *may* be happening this year. My language last night that it is in the cards was not justified because I don't know that. I still think a case can be made, that there is evidence, and that it very well might happen. Once we have hashed out the first question, I will present my case.
BB
Last year, the markets experienced an inexplicable transference of amplitude from the 20-week cycle down (anticipated December 2004) to the next 5-week cycle down in January 2005.
An almost identical pattern is occurring this year--with a twist. Instead of selling off right after the New Year, the market has launched, creating the ultimate bull trap. This is not to say it isn't a tradeable rally--of course it is. But the bullish mood is custom designed to suck in the unsuspecting public one more time.
So when will we see the full force of the 80-week low (even if associated with a 5-week or 10-week low)? It could start any day, but as late as next 10-week cycle down. The reason may *appear* to be some world event associated with Israel, Iran, North Korea, the inversion of the yield curve, or perhaps simple profit taking. When the decline begins, don't be fooled by the commentaries or the major events that appear to trigger it. It was in the cards all along.
Oh, how the market does like to fool and surprise.
Last year's pattern compared to this year's is worthy of study. Nearly identical in the runup, pause, runup pattern with a delayed cycle low. What is it about New Year's?
Any serious study of the FOMC activities charts on BullandBearWise.com reveals that major spikes have nearly always occurred during market declines, at cycle lows, or just after cycle launches. This has happened far too frequently to be mere coincidence, and clearly suggests that the Fed *is* interested in managing the market. The difference this last time is that there was no major decline, no significant evidence of a cycle low, but the Fed turned on the power to the maximum on the same day the FOMC minutes were released--after a significant ramp up in December. Interesting. This is not a conspiracy theory when the evidence is explicit. I'm *not* saying the evidence is conclusive, however. I simply do not know enough to say one way or another.
BB
Airedale, regarding the Fed and the cycles. Itis interesting that the cycles existed prior to the Fed, but I doubt you would deny that the Fed has the power to put the economy and the markets straight into the crapper. To send the market into a tailspin, it would only need to raise the interest rates 1/2 basis point at the end of January. If that didn't work, twice more should finish the job. The divergence from market expectations and Greenspan's gentle increases would create panic.
If there is indeed a correlation between FOMC activities and the stock markets--and many charts indicate there is--it could influence our opinion concerning the cycles and expectations concerning market direction.
A bullish move up is not always a long-term bullish signal. While I definitely want to trade the charts, I find it helpful to not always swallow the bait hook, line, and sinker. By questioning what I see, I cast a wider net for evidence and often see the market turns sooner than I would otherwise.
Thanks to all for a good discussion.
BB
Cash, first, I'm not saying the Fed can control everything. I do believe that the Fed plays a huge role in the economy and is therefore part of the market cycles. That the Fed tries to manage the economy is beyond question, and if the Fed can and does manage the economy, it directly or indirectly manages the stock market.
Second, long before the NASDAQ crashed, I read comments by Greenspan saying it likely would and that wise investors should take notice. I so clearly remember the night I read Greenspan's quiet comments to that effect in 2000, and then watched it come to pass. He in effect said that it was necessary to bring the mania under control, and the Fed's raising of interest rates prior suggest that the Fed knew exactly what it was doing. So once again, Fed management of the economy and at least indirectly the stock market.
Third, if you simply examine the charts of FOMC activity prior, during, and after market declines and rallies, you will at least see the possibility of a correlation. I'm sure this correlation can be argued and discussed forever. The recent ramping up of Fed activity in November, December and early January is at least significant.
I'm not complaining one way or another about market manipulation. I'm just taking note of possible Fed management of the market. This may be one instance where market cycles have actually been altered, because it sure seems like an 80-week rollover was beginning and then turned on a dime. Just a possibility, and this is just a discussion, and there is real evidence to support it.
"Aaarrrggghh" offers limited insight into the subject. :)
BB
OT: Golfin, is your comment designed to add anything whatsoever to the discussion? Or are you just taking potshots? I have no idea what you're talking about.
The other day you took a potshot at this board for being too bullish back in October. I went 100 percent short on day 1 of that decline. So I've noticed your tendency to speak without knowledge.
I look forward to your contributions concerning technical analysis here. I recognize you have natural ability, and I would like to see it full application.
BB
blackbelt wrote: ..."It went up so we blame the 9-year cycle. This kind of reasoning subtracts from our credibility IMO. It sounds like we are just making stuff up to fit whatever the market delivers. Given the size of the last 80-week and 40-week cycles down, it seems at least a little suspicious to now point to the 9-year cycle as the lifting force. Why would the 9-year suddenly kick in now when it didn't in 2004 or in the spring of 2005".....
Airedale replied:
belt, where do you think the max momentum is for any cycle's upside?
My response:
Airedale, I enormously appreciate how you advocate the Hurst hypothesis and the way you analyse the markets in particular. So don't get me wrong. But I see you are ducking my point with a somewhat unrelated question.
The heart of my criticism is that there could be many explanations for the market's current behavior. I would like to see more thoughtful analysis of what is happening rather than the simplistic reasoning that points to the 80-week cycle down if the market goes down but to the 9-year cycle if the market goes up. Just a suggestion.
To answer your question regarding maximum momentum: It would depend on whether the cycle is left or right translated. There are two power surges in the cycles I've studied: 1) Off the low and 2) just before the peak. In the current situation, I see evidence that current market performance could be matching either a cycle launch or a cycle top.
blackbelt wrote: "it is reasonable to say that the energy of the 20-week cycle down was delayed into January"
Airdale asked: "energy? delayed? explain what you mean by this. what would cause a delay in "energy"?"
I am developing my own theory to explain market cycles, and some of my personal languaging of this theory leaked into my post. Over the last year, you have given two or three explanations concerning what happened last year when we got a substantial down move in January instead of at the expected time of the 20-week cycle low. I am in complete agreement with everything you have said concerning the market's behavior at that time.
I am proposing the possibility that we could see similar market effects this year. For example, we were anticipating the 80-week low in mid-January give or take a week. I am suggesting we could see a market decline come later just as it did last year--so that a smaller market cycle (5-week or 10-week) could come with increased amplitude. Just a hypothesis for now, and we shall see how it plays.
Right now, I am entertaining the possibility that Fed fiddling is as good an explanation for current market behavior as the 9-year cycle. If true, it won't last, and we could see increased amplitude to the downside later on. The longer-term FOMC charts show a significant ramping up of liquidity all the way through November and December with the peak hitting on January 3. Very interesting.
As you know, I usually stay quiet on this board even though I read every word. I get cranked up when I see unusual market behavior, and this is it. Take a close look at the $FTSE for example. Most interesting.
I'm not looking for arguments or making petty points. Not wanting to take on the Hurst master here. :) My purpose is the same as Cash's--to read the posts here to see whether I'm missing anything. If I see an opportunity to post a fresh point of view, I do so. :)
I agree that we should seize the day when the market puts up evidence contrary to our expectations. Right now, the evidence is bullish.
BB
Some careful study of Federal Reserve operations on this page is warranted:
http://www.bullandbearwise.com/Default.asp
FOMC began ramping up to record levels in November and December and hit a peak on January 3--the day the market took off like a rocket. This type of Federal intervention is not sustainable nor good for the economy in the longer term. It is amazing that the Fed would engage in this kind of activity to ensure Greenspan's legacy, but that is what it appears to be on the surface.
It is also interesting that M3 is the form of money supply that has been increasing most dramatically--and the very one that the Fed will stop reporting in March.
So much for the idea that the market is not manipulated.
BB
Cash, this is exactly the kind of discussion I want and serves this community well. One-sided thinking does not serve, imo.
I appreciate your well-expressed views on how the cycles work in relation to investors' interpretation of fundamentals. I did understand this before.
I'm simply saying that the recent market behavior does not mesh with the last 80-week, 40-week, and 10-week cycles down. Then when I look at the $FTSE, $CAC, $BSE, I see a market that is behaving much more like a top prior to a 40-week and 80-week cycle down. So I simply want to put that view out there for discussion so that we don't get caught with our blinders on.
Instinctively, I'm not trusting the current rally any farther than I can kick it, and that's my opinion for now. The chart of Fed operations is very suggestive and may explain the current divergence from normal cycles. Would this affect stock exchanges around the world?
Finally, we do have precedence of delayed market cycle behavior around the New Year. It is entirely possible that the selling we would normally see with the 80-week low will be pushed forward slightly to the next 5-week or 10-week cycle down.
As far as my not trusting the current rally, it may seem irrational or unjustified. The market has been in fact heading up, and so all I can do is acknowledge that fact.
Call me neutral for now. If the opinions expressed do not sound neutral (not trusting this market any farther than I can kick it), well I mean to be critically neutral.
BB
The $FTSE, $CAC, and $BSE have all been following the same cycles as the $NYA. None of the former delivered any kind of measurable low yet where we would expect the 80-week nest of lows.
What's up? Or just how will this blow up?
BB
Theoretically, anything can happen on any given day.
Realistically, honoring stops is the only way to trade.
Practically, we can't trade on the possible exceptions and have to focus on what is actually happening now.
Having said all that and clearly seeing the bulls are leading the charge, I still see real reasons to question this move. Specifically, I ask you to question your rationalizations for the move. In other words, if the market had fallen this week, we would say that it was the 80-week cycle. It went up so we blame the 9-year cycle. This kind of reasoning subtracts from our credibility IMO. It sounds like we are just making stuff up to fit whatever the market delivers. Given the size of the last 80-week and 40-week cycles down, it seems at least a little suspicious to now point to the 9-year cycle as the lifting force. Why would the 9-year suddenly kick in now when it didn't in 2004 or in the spring of 2005?
I also question the jump-on-the-bandwagon mentality. I at least want to engage in some serious discussion of the other possibilities. For example, last year we expected a 20-week low in December, and it was difficult to see except in retrospect. Then a significant move down occurred at the next 5-week cycle low in January 2005. In this case, I think it is reasonable to say that the energy of the 20-week cycle down was delayed into January. What if we are now experiencing a similar delay? Is there evidence? At least some:
* Retail--a significant portion of America's GDP--is falling.
* The $VIX--which does follow the Hurst cycles to a T--is
exceptionally low and has not yet delivered an 80-week high.
* The $CPC is in the same range as it was prior to the last
40-week and 80-week cycle lows.
* The $BKX has been less than exhuberant.
* The $TRAN has not joined the party.
* The market behavior we observed this week is
consistent with recent tops (see March 2005).
* Many stocks are in need of a good haircut and can only
deliver significant growth if a new mania drives it, and
I'm not sure mutual fund cash levels and U.S. prosperity
can drive it here and now.
* The yield curve continues to flatten and invert, and the
British yield curve has already inverted significantly.
* The article Cash quoted regarding the Chinese policy on
the U.S. dollar and bonds could be significant
immediately. Maybe. If we have to raise interest rates
to feed the need for foreign capital, this economy
could be in a world of hurt fast, and the stock market is
always looking out 6 months. Now this part is funny-mental
speculation, which is a habit I don't want to start. I
do want to stir up more contrarian discussion, however.
I'm not pushing this point of view. I'm just offering it as a counterbalance. I'm just asking questions, and I'm not even sure I've asked the best ones or offered the best evidence in support of the possible bearish case. But I do believe this rally needs to be questioned. In the meantime, I will trade the tape just as it is--bullish.
Bliss--you go, man. You have been right many, many times when I have doubted you. And I dispute the point of view that you just make bullish comments until your proven right. I have seen you make some great calls, and you made this bearish call for January a long time ago. And you're sticking to your guns even though it appears that you are dead wrong.
BB
Golfin--Check out the $INDU in August 2000. Does this qualify?
Ealier in the year, you were equally convinced the market could not go up.
I'm growing equally convinced the market can turn any pattern--any whatsoever--in any unexpected direction for reasons no human being could possibly predict.
Having said that, I see that the Hurst cycles have an enormous weight of statistical probability behind them. Even so, the market can work with these cycles in the most surprising ways to deliver unexpected results. For this reason, stops must be honored.
Please don't take my words personally. Trading can be the ultimate form of self-inquiry, where I discover how I tend to rationalize and fool myself. I'm discovering I know a lot less than I think I do.
BB
The $CPC was exceptionally high prior to the October 2005 decline, and so as with most charts and indicators, these readings are only meaningful relative to the immediate past. Currently, we are hitting relatively low levels.
BB
Cash, excellent post. However, in terms of predicting short-term market moves, all this analysis is not particularly helpful. For example, the 10-day and 20-day moving averages on the $CPC were about where they are now just prior to the declines into the 80-week low during the summer of 2004 and into the 40-week low in the spring of 2005. In other words, major market declines can and do occur even when the little guys are bearish.
BB
I agree that there are many stocks in need of a good haircut. It's not just Google. Take a walk through the various sectors, and you will find them everywhere--with little room to climb without a new mania taking hold.
This is one reason why I believe we could see surprising selling pressure even in January and not later than the 10-week cycle down. I'm not sure we will get a 20 percent haircut that soon, however. I agree with Cash on when to expect the larger drop.
BB
Lexus, clearly many are asking the same question. I do see a possibility that the normal amplitude of a 40- and 80-week selloff could appear in a 2.5-week, 5-week, 10-week, or even a 20-week cycle low in our immediate future.
We have precedence for such delayed selling. Last year the nominal 20-week cycle occurred in December 2004, but the selling we would normally associate with such a move only occurred in January 2005 with the 5-week cycle down.
I have additional reasons to think we could see at least another wave down to backtest the December lows--and to anticipate strong selling pressure at the next 10-week cycle down.
BlackB
$NYMO -1.96. (EOM)
Bliss, I'm looking forward to your analysis. Examining the broadest evidence, what do you see now?
BlackB
Cash, I don't see that there is necessarily any more conflict between the 4-year cycle and the first 80-week low than there is between the 4-year cycle and the second 80-week low. The 4-year cycle could easily peak on either side of the second 80-week low, although I do appreciate your theory that the 4-year cycle peak could provide some added lift that would essentially erase or subdue the 80-week decline.
BlackB
Is it theoretically possible that the cycles would get out of synch? If the 10-week low is in, then the 20-week should be in. If the 20-week is in, the 40-week should be in. If the 40-week is in, what the heck happened to the 80? Several things don't seem quite right for an 80-week low here, and I expect at least some significant turbulence over the next couple weeks while the market sorts out the distortions.
I am not predicting a crash but see conditions are right for one which would bring the 80-week cycle back into synch with the other cycles.
BlackB
$NYA blasted through the roof. Airedale, how do you read? (EOM)
Last year we saw the 20-week low in December with barely a trace and then the following 5-week low hit with increased amplitude because of delayed selling after the New Year.
This year I will be watching for similar anomalies. I'm considering the possibility that the full force of the 80-week low could hit with the 2.5 or 5-week cycles following when the ideal 80-week low is expected in early January. This scenario could correspond with the anticipated Fed meeting at the end of January and the transition to a new Fed chairman.
The actual number of weeks that have passed since the last 80-week low currently stands at roughly 72.
BBelt
Thanks Airedale, Cash, USA for all your sage analysis and wise administration of a great discussion board.
Merry Christmas, Happy New Year, and Prosperity for all in 2006!
Belt
Biotechs (BBH) also coming down hard even though the sector was a big winner this year. BBelt
INTC, MRK, and some Dow components down AH. (EOM)
$NYMO +2.97 and I'm very short-term bullish. (EOM)
DowDeva, re: yesterday's $NYMO reading: I noticed the discrepancy after posting my message. In any case, there is an old rule of thumb (learned from Airedale of course) that when the $NYMO moves less than 3 points, the market will make a big move (up or down) within 3 days. I was expecting a down day today, and think the market could turn very short-term bullish here.
Clearly the market is beginning to crack, but expect to see at least one more run at the top. Could be wrong of course.
BBelt
$NYMO +.18 today. Prepare for market move. (EOM)