Short Term Trading Member Forum

[Blackbelt1]

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