STOCKMARKET CYCLES by Peter

svca

This article is brought to you by:
CONSENSUS (http://www.consensus-inc.com/002 ... com/1013fc-pesc.htm)


STOCKMARKET CYCLES

Prepared by Peter Eliades

The Cycles

(October 2013) Terry Laundry passed away in July 2012 but he left behind a legacy of genuinely original, creative, and, at times, brilliant market work. We have often commented on Terry’s work in our newsletters over the past few decades and over the past few years we have used his T Theory to analyze the daily advance decline line of the New York Stock Exchange. Although Terry and I were market buddies for over 30 years, we never met personally. We spoke on the phone often, exchanging ideas, and in the few years before his death we often communicated via Skype. I mention Terry now because the string is running out in terms of possible tops for the longest term Ts according to Terry’s T Theory, and as a tribute to him, I hope to present to you a chart depicting the prior successes of his advance decline Ts along with a chart depicting what I believe are the last two possible dates for a very major top in the daily advance decline line of the New York Stock Exchange. Prior to viewing the charts, we will use a few paragraphs to explain as best we can Terry s T Theory, especially in relation to the advance decline line.

Terry s basic premise is that there are ways of measuring cash buildups that generally occur during market declines as people are selling, and those cash buildups comprise the left-hand side of the letter T. Once the cash buildup ends, a rally begins and the distance from the center post of the T to the right side of the T where market tops occur matches the distance from the beginning of the cash buildup to the center of the T. In other words, the length of the left-hand side of the T determines the length of the right hand side of the T where market tops are formed. Although the theory is far more sophisticated than this simplistic explanation, the simplistic interpretation would simply say that a market rally lasts as long as the preceding decline. Terry experimented by using different advance decline oscillators and volume oscillators over the years to determine the length of the cash buildup, the left-hand side of the T. But one of the easiest ways to measure Ts is to use the cumulative advance decline line of the New York Stock Exchange. The chart we are presenting below will attempt to show you how eerily accurate these advance decline Ts can be. We should emphasize that the following analysis is not necessarily Mr. Laundry s own interpretation of his theory, but we had long discussions with Terry for a year or longer preceding his untimely death and we pointed out to him how his theory pinpointed to within three trading days the top of the advance decline line in 2007, a top which ultimately led to the second worst bear market of the past 100 years, and the important top on the advance-decline line in 1998 to within six trading days. Those were arguably the two most important advance-decline line tops of the past 30 years.



The chart above shows the daily advance decline line of the New York Stock Exchange going back to 1926. Let s examine how Terry’s Ts led to the most important tops in the advance decline line of the last several decades. One of the things that Terry discovered over the years is that the center post of some Ts is best located at the midpoint of two market bottoms rather than at the first or second bottom individually. As we started to experiment with time spans using his T Theory, we also found that some Ts are best measured by beginning the left side of the T midway between a double top rather than at one individual top or the other. We also noticed that sometimes locating at a midpoint between two tops or two bottoms worked best but at other times, more accurate results were obtained from using an individual top or bottom rather than the midpoint of those tops or bottoms. Let s give you one more general rule before we get to the application of the theory. In determining where the center post of the T should be placed, the general rule is that a center post is placed at the first bottom which leads to a higher high than the high seen between the current low and the low preceding it. So, for example, the 1974 low which is the lowest point on the chart is probably not a good candidate for the center post of the T because the rally following the 1974 bottom failed to move above the high between the 1970 and 1974 bottom. One could argue that the 1982 bottom was a candidate for the center post of a long-term T because the rally after the 1982 bottom appeared to at least match if not slightly surpass the high between the 1974 and 1982 bottoms. In reality, one could argue that either the 1982 bottom or the midpoint between the 1974 and 1982 bottoms would be good candidates for the center post of a T and we will show you momentarily how well each of those choices worked in pinpointing a future top in the advance decline.




The chart above, as noted earlier is a daily chart of the cumulative advance decline line of the New York Stock Exchange going back to 1926. Notice the long-term basing pattern which forms between the lowest point on the chart on December 23, 1974 and the low on July 24, 1984. There were three distinct lows formed during that basing pattern. The dates of those lows were December 23, 1974, August 12, 1982, and July 24, 1984.

Although the 1974 low turned out to be the most important one, it was not a prime candidate for the center post of a T because, as noted above, the advance which followed that bottom did not move above the highs established between the preceding two lows, namely the 1974 low and the 1970 low.

The first real candidate for the center post of a large advance decline T according to our understanding of Terry s theory occurred at the August 12, 1982 low in the advance decline line. That low was followed by a high on September 11, 1978, that slightly surpassed the highest point achieved between the lows of 1974 and 1982, namely the high of June 16, 1983. The question now becomes what date should be used for the left-hand side of the T. There are three candidates. There was an almost exact double top on the daily advance decline line registered on March 15, 1956 and March 13, 1959. Each of those is an obvious potential candidate for the left side of the T. Because those tops formed an almost exact double top, however, one could argue that the exact midpoint between the two highs could be used for the left-hand side of the T. That exact midpoint is the date of September 12, 1957. Now we need to measure the time period from the August 12, 1982 centerpost of the T back to the September 12, 1957 midpoint of the two major tops. These measurements can be done either with calendar days or trading days. There were 6256 trading days on the left side of the T. If you measure forward another 6256 trading days from the August 12, 1982 center post to determine the resolution for the right side of the T, the calculated date turns out to be May 30, 2007.

The exact all-time high on the daily advance decline line of the New York Stock Exchange prior to what was arguably the second worst bear market in modern United States stock market history occurred on June 4, 2007, just three trading days away from the calculated date. Mind you, this calculation covered a time span of almost half a century from the left side of the T in 1957 to the right side of the T in 2007. Was it a coincidence?

That is always a possibility, of course, but let s continue to look at the data associated with the chart and see if we can argue that the other important top on the advance decline line that occurred on April 3, 1998 and followed the basing period between 1974 and 1984 could also have been determined by a long-term T. When there are different candidates for the left side of the T and the center post of a T, all of the possible combinations and permutations should be examined. For now, let s give you the combination that worked. For the left side of the T we will use the peak of March 13, 1959 and for the center post we will use the midpoint between the 1974 and 1982 bottoms (remember that the 1974 bottom did not qualify as a center post candidate because of the explanations given above). The exact center of those two bottoms was October 17, 1978 and that is the date we will use for the center post of the proposed T. There were 4914 trading days between March 13, 1959 and October 17, 1978.

That time span represents the left side of the T. If we measure another 4914 trading days from the October 17, 1978 center post, the calculated right side of the T would be March 26, 1998. Six trading days later, the advance decline line reached an exact peak which preceded its sharpest decline of the prior 25 years. Another coincidence? Of course, it remains a possibility, but the theory has now been shown to identify the two most important tops in the advance decline line over the past 30 years within just a few trading days.

We are now faced with the most important task of all. With the exception of the market decline from October 2007 to March 2009, the advance decline line of the New York Stock Exchange has seen one of the great rallies in market history beginning in the very early 2000s and lasting to the current day. As we are preparing this report on October 22, 2013, the daily advance decline line has reached yet another new all-time high.

We noted earlier that all potential candidates for the left side of a T and the center post of a T should be examined. We have been doing that over the past two years as regular followers of our publications are aware, but the advance decline line has yet to be halted by any of the dates calculated to be the potential right-hand side of the largest T in history, a T that could lead to one of the more important tops in market history. We are quickly running out of candidates for potential tops. As far as we can determine, there are only two remaining possibilities. They both revolve around using October 8, 1985 as the center post of the mega T. Examine the chart below and note that October 8, 1985 marked a bottom which finally led to a convincing break above the resistance that had been formed from the late 1970s to the mid-1980s in the advance decline line. We have drawn that resistance line on the chart. We have also drawn three up arrows on the chart just above the January 25, 1985 label on the chart. Those arrows all point to potential candidates for the center post lows of the mega T. The first two candidates have used up all their possibilities as a center post in combination with points 1, 2, and 3, the potential candidates for the left-hand side of the T between March 15, 1956 and March 13, 1959.

As far as we can see, there are only two remaining possibilities. Both of them involve using October 8, 1985 as the potential center post low of the T. The one that is of immediate interest to us now is the T whose left-hand side would begin at Point 2, the exact midpoint between the 1956 and 1959 tops in the advance decline line. That exact midpoint occurred on September 12, 1957. If we measure the left-hand side of the T in trading days, it comes to 7053. That would predict a final high on the advance decline line on September 27, 2013. If we measure the left-hand side of the T in calendar days, there are 10,253. Adding that number of calendar days to the October 8, 1985 center post gives us a date of November 3, 2013.

As we noted above, this is the penultimate date that can be calculated from Terry Laundry s theory. It would be more accurate to say, however, that it is the penultimate date that can be calculated from our interpretation of Terry s theory. As you have probably gleaned in looking at the chart, the only remaining time span resolution after November 3, 2013 would use the furthest point on the left, March 15, 1956, in combination with the furthest point on the right, October 8, 1985. That combination would lead to a resolution on May 3, 2015. There are many reasons to believe the November 3 date is the more logical of the remaining two. Most of those reasons relate to longer term patterns and cycles that we have discussed over the past several months.

Keep in mind that a top in the advance decline line does not necessarily mean a top in the overall market averages and indexes. In fact, they very seldom coincide. The top in the advance decline line almost always precedes major tops in the important indexes by several weeks if not several months or even years. Nevertheless, we should note that November 3 is less than two weeks away. It falls on a Sunday so we will be watchful for the possibility of a major top in the advance decline line within a few days on either side of that date.

棋王

quants

楼主的东西就是和别人不一样