I have left the analysis from the last couple of days because I still think it is relevant. The market has gone nowhere since Friday. Therefore I will leave the statistics in its place and direct your attention to something which I first read about back in 2002. I have taken this article from Marting Armstrong, the author. It is not the full article, but only the parts that are relevant for this site. I hope you will read it. It will give you an idea of why 27th February 2007 is important.
For many years, I have pursued a field of study that is at best non-traditional. My discovery of a global business cycle during the early 1970's was by no means intentional. As a youth growing up in the 1960's, the atmosphere was anything but stable. I don’t really know if it was Hollywood that captivated my interest in history with an endless series of movies about Roman and Greek history, but whatever it was that drove me, I can only attest to what resulted.
My father had always wanted to return to Europe after serving under General Patton during the war. My mother insisted that she would go only when he could afford to take the whole family. That day finally came and something inside me insisted upon being able to earn my own spending money. I applied for a job despite my age of only 14. It wasn't much, but on weekends I worked with a coin/bullion dealer. In those days, gold was illegal to buy or sell in bullion form so the industry centered on gold coins issued by Mexico, Hungary and Austria. I soon became familiar with the financial markets as they were starting to emerge. It was this experience that began to conflict with the formal training of school.
One day in a history class, the teacher brought in an old black and white film entitled "Toast of the Town." This film was about Jim Fisk and his attempt to corner the gold market in 1869 that created a major financial panic in which the term "Black Friday" was first coined. In the film was a very young support actor named Cary Grant who stood by the ticker tape machine reading off the latest gold prices. He read the tape and exclaimed that gold had just reached $162 an ounce. I knew from my job that gold was currently selling for $35. At first I thought that the price quote of $162 in the movie must be wrong. After all, Hollywood wasn’t known for truthfulness. Nonetheless, I was compelled to go to the library to check the newspapers of 1869 for myself. This first step in research left me stunned – the New York Times verified $162 was correct.
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I didn’t know how to go about such a quest to find if the business cycle was definable. Admittedly, I began with the very basic naive approach of simply adding up all the financial panics between 1683 and 1907 and dividing 224 years by the number of panics being 26 yielding 8.6 years. Well, this didn’t seem to be very valid at first, but it did allow for a greater amount of data to be tested compared to merely 3 waves described by Kondratieff.
The more I began to back test this 8.6-year average, the more accurate it seemed to be.
The issue of intensity seemed to revolve around periods of 51.6 years, which was in reality a group of 6 individual business cycles of 8.6 years in length. Back testing into ancient history seemed to reveal that the business cycle concept was alive and well during the Greek Empire as well as Rome and all others that followed. It was a natural step to see if one could project into the future and determine if its validity would still hold up. Using 1929.75 as a reference point, major and minor turning points could then be projected forward in time.
For the most part, I merely observed and kept to myself this strange way of thinking. In 1976, one of these 8.6-year turning points was quickly approaching (1977.05). For the first time, I began to use this model expecting a significant turn in the economy back toward inflation. My friends thought I was mad. Everyone was talking about how another Great Depression was coming. The stock market had crashed by 50% and OPEC seemed to be undermining everything. I rolled the dice and stuck to it and to my amazement, inflation exploded right on cue as gold rallied from $103 to $875 by January 1980.
As my confidence in this model increased, I began to expand my research testing it against everything I could find. It became clear, that turning points were definable, but the wildcard would always remain as a combination of volatility and intensity. To solve that problem, much more sophisticated modeling became necessary.
As the 51.6-year turning point approached (1981.35), there was no doubt in my mind that the intensity would be monumental. Indeed, interest rates went crazy with prime reaching 22% and the discount rate being pushed up to 17%. The government was attacking inflation so hard, they moved into overkill causing a massive recession into the next half-cycle date of 1985.65. It was at this point in time that the Plaza Accord gave birth of the G5. I tried to warn the US government that manipulating the currency would set in motion a progressive trend toward higher volatility within the capital markets and the global business cycle as a whole. They ignored me and claimed that until someone else had such a model, they did not believe that volatility would be a concern.
The next quarter cycle turning point was arriving 1987.8 and the Crash of 1987 unfolded right on cue. It was at this time that a truly amazing development took place. The target date of 1987.8 was precisely October 19th, 1987 the day of the low.
The Mystery of 8.6
At first, 8.6 seemed to be a rather odd number that just didn’t fit mathematically. In trying to test the validity of October 19th, 1987 being precise or coincidence, I stumbled upon something I never expected. This is the first time I will reveal something that I discovered and kept secret for the last 13 years. The total number of days within an 8.6-year business cycle was 3141. In reality, the 8.6-year cycle was equal to p (Pi) * 1000.
Suddenly, there was clearly more at work than mere coincidence.
The Domino Effect
The events that followed 1987 were all too easy to foresee. The G5 talked the dollar down by 40% between 1985 and 1987 essentially telling foreign capital to get out. The Japanese obliged and their own capital contraction led to the next bubble top at the peak of the 8.6-year cycle that was now due 1989.95. As the Japanese took their money home for investment, the value of their currency rose as did their assets thereby attracting global investment as well. Everyone was there in Tokyo in late 1989. Just about every investment fund manager globally was touting the virtues of Japan. As the Japanese bubble peaked, capital had acquired a taste for foreign investment. That now savvy pool of international investment capital turned with an eye towards South East Asia.
Right on cue, the capital shifted moving into South East Asia for the duration of the next half-cycle of 4.3 years until it too reached its point of maximum intensity going into 1994.25. At this point, international capital began to shift again turning back to the United States and Europe, thus causing the beginning of a new bull market in a similar manner to what had happened in Japan. In fact, 1994.25 was once again the precise day of the low on the S&P 500 for that year.
The Future
Full credit to www.sandspring.com where I got the following:
Using the Crash of 1929 (1929.75) as his starting point, Armstrong was also amazed to find that his general 8.6 year rhythm worked in a remarkably prescient manner going forward in time -- often almost to the day. We list these cycle dates on the table below, each cycle lasting almost exactly 8.6 years, and have added our own Elliott Wave labeling for those so inclined.
1929.75: U.S. equity market crash -- end to Wave I;
1938.35: End of U.S. bear market -- end to Wave II, beginning of 1 of III;
1946.95: U.S. equity market high -- end to Wave 1 of III;
1955.55: U.S. equity market breaks the 1929 high --
end to Wave 2 of III, beginning of 3 of III;
1964:15: U.S. equity market high -- end to Wave 3 of III;
1972.75: U.S. equity market high -- end to Wave 5 of III,
beginning of protracted wave IV and inflationary spiral;
1981.35: Last series of Fed tightening begin to squelch inflation,
beginning the final descent of Wave IV into August 1982;
1989.95: First global market to complete its Wave V topped on this day: Japan. End of Wave 1 of V elsewhere;
1998.55: July 20, 1999 marked a significant high in both European and U.S.
equities, preceding the August 1998 Russian debt crisis -- the end of Wave 3 of V;
2007.15: Next 8.6 year cycle date. Final high or a major low?
The exact date is the 27th February 2007.
I hope this has been of some use. I personally find it mind-boggling. It is also interesting how it ties in with a Matrix turn in March!!!!!!!
Tom
from the 2nd February 2007
I have updated the DAX PDF today. When you read this, you will notice the comment on the big area of resistance. I think it is important to note though that the 61.8% retracement didn't cause any major obstacles to the DAX, but it coincides with a similar pattern in the OEX chart shown at the low of this page. This chart has also hit a major FIB level.
Click on image to enlarge
Yesteday I wrote about the statistics following a FED rate announcement. I will put this up here again today because the effect of the rate announcement is viewed over the course of several days.
Today is Non-Farm Payroll day and I am getting ready to short the market on any sign of weakness. I will list the numbers below, which are critical to the bear case.
Here are the stats again:
Meeting 31st Jan: The Dow rallies 90 points the day after, and then sells off 230 points in the next 4 days
Meeting 28th March: The Dow loses 90 points on the day and sells off 250 points in the next 13 days
Meeting 10th May: The Dow is up 3 points on the day, and sells off 640 points in the next 10 days
Meeting 29th June: The Dow gains 217 points, trades sidesways for 4 days, and sells off 460 points in 8 days
Meeting 8th August: The Dow loses 250 points from the high made on the Fed day over the next 3 days
Meeting 20th September: The Dow gains 70 points on the day, and then sells off 160 points in 2 days
I think it is interesting to note the big reversal in Google yesterday. It looks like a big top for Google and it will take a move back above $500 for the cycle turn in Google to negate the bearish implications of yesterday's $20 move.
The FTSE: The FTSE chart is getting ready to break above the big resistance of 6325. If we can get above this area, then I will not short just yet. I would rather buy the index, in particular the spread trade I write about below. I will wait for the NFP number to see how the market is trading. Friday tends to be a trend day, and if we break above 6325 we could have a good move higher in the FTSE.
The DAX: The Dax cash index in the big picture is bullish. The short-term weakness sign is a move below 6820. However, with the market moving up for 8 days, we should see a retracement of some sort.
The key to the day will probably come in the GLOBEX trading time frame once the news have been released. As it is Friday and NFP day we tend to see an extended move. As most indices are sitting near crucial resistance we can either get a huge sell-off, or(surprise surprise) if we can break above the highs of yesterday, a short-covering rally.
Please note: You can find yourself in a situation where the market runs the stops above the area of resistance and then sells off. You should use the open as your guide. If we trade higher and come back down below the open, you can expect this move to continue. I should also note that I am not expecting a big bull market reversal but a correctio to the overbought condition in the various indices.
Good luck :)
I will keep the chart for the FTSE/DAX differential here with the comment from yesterday.
I will leave you with this and ponder upon the following chart. It is the Differential chart of the FTSE DAX cash index. It shows the DAX minus the FTSE over the last 18 years. Throughout the period the DAX has been trading below the FTSE and every move above +500 has been a sign of a top. The trade I am looking to execute is to BUY the FTSE and SELL the DAX in the same size, betting on the two indices to come back in line with the historical trend.
ANALYSIS
