Is the 7.25-Year Stock Market Cycle on Schedule?

Home > Stocks
Is the 7.25-Year Stock Market Cycle on Schedule?
Knowledge of market cycles can complement Elliott wave analysis

By Bob Stokes
Thu, 03 May 2012 17:00:00 ET

Get investable insights sent to your inbox at least once a week – for free. Challenge the way you think about investing with The EWI Independent.

Privacy

It's well known that the stock market tends to rise around certain holidays like Christmas and Easter...

... Yet the key word is "tends."

Markets don't always conform to seasonal biases -- not even to the well known "Sell in May and go away." Still, an investor might do well to consider the market's seasonal tendencies.

So it is with stock market cycles.

Some have been nearly like clockwork for decades. With some cycles, however, a market turn doesn't occur at the exact cycle crest or a market bottom at the exact trough. This may be because longer cycles are influencing shorter ones or vice-versa. In some cases cycles simply vanish. Even so, it can be helpful to have knowledge of market cycles.

...my view of time cycles is that they are transient epiphenomena of the Wave Principle. This means that cycles are not the fundamental regulator of stock prices. They merely show up for a time...Cycles can be quite useful...

Elliott Wave Theorist, April 2010

The study of cycles can complement Elliott wave analysis. Here's more from that same issue of the Theorist:

The March 2004 issue of EWT postulated a 7-year crisis cycle going back to 1973 and used it to predict another crisis in 2008. Here are the table and the forecast from that issue:

—1973: Arab oil embargo, with spillover into 1974 stock market low of wave IV.

—1980: peak in the inflation rate; top in gold, silver and mining stocks, interest rate spike, stock-market “massacre” and low of wave 2.

—1987: stock market crash and low of wave 4.

—1994: “Republican Revolution;” suspicion of government due to Waco attack (1993), “black helicopters,” etc.; stock market breaks uptrend line at low.

—2001: successful terrorist attack on the World Trade Center; low of wave (3) of 1 [actually 3 of a].

Seven years after 2001 is 2008, so that is the next year to look for an extreme in social fear.

There was certainly a crisis and plenty of social fear in 2008, so this cycle performed as it should have.

Robert Prechter pointed out another cycle in his book At the Crest of the Tidal Wave (p. 462):

The 20-year cycle, which has lasted between 18 and 21 years, produced the dramatic stock market lows of 1884, 1903, 1921, 1942, 1962 and 1982. This cycle projects another low in the year 2002, + or - 2 years.

As we know, the market did reach a bottom in 2002.

Prechter has also informed subscribers about a 7.25 year market cycle. This cycle peaks at the same time as the 20-year cycle. Moreover, because the 7.25 year cycle is shorter, we can narrow the timeframe of what we see as a significant market turn.

Most revealing: the market cycles we've noted (in addition to the 34-year market cycle) are dovetailing with our Elliott wave analysis.

Learn our latest analysis and forecasts in the May Financial Forecast via a limited-time 57% discount offer>>

Lock in Your 57% SAVINGS OFFER: Get The Elliott Wave Theorist, Financial Forecast and Short Term Update for 3 months for only $99

See our EXCLUSIVE charts and read our one-of-a-kind analysis of stock indices, bonds, gold, silver, the U.S. dollar, the euro, the economy and more

Keep complimentary copies of the second edition of Conquer the Crash and the Wall Street classic Elliott Wave Principle

30-days RISK-FREE!

Follow this link to get your 57% SAVINGS while still available>>

Tags: Elliott wave, financial forecast, Robert Prechter, stock market cycles, U.S. STOCK MARKET

May 13-16

Las Vegas Money Show

July 10-13

Freedom Fest Conference

Stay Ahead of the Trend in U.S. Stocks

EWI's Financial Forecast Service equips you to think, trade and invest independently from the crowd. Here's what you'll get, risk-free:

Short Term Update -- Intensive forecasts and analysis 3x/week for U.S. stocks, gold, silver, bonds and the U.S. dollar.
Financial Forecast -- In-depth, intermediate-term perspective on U.S. stocks, gold, silver, bonds and the U.S. dollar.
Theorist -- Bob Prechter's monthly big-picture insights.

Put the Financial Forecast Service on your screen in minutes, risk-free>>

Most Read

Highest Rated

Free Video Course

Learn the Why, What and How of Elliott Wave Analysis

Financial media use news and economic events to explain market moves. Steer clear of this misguided approach. Take part in the Elliott Wave Crash Course to learn what really moves the markets.

The Elliott Wave Principle is a detailed description of how financial markets behave. The description reveals that mass psychology swings from pessimism to optimism and back in a natural sequence, creating specific Elliott wave patterns in price movements. Each pattern has implications regarding the position of the market within its overall progression, past, present and future. The purpose of Elliott Wave International’s market-oriented publications is to outline the progress of markets in terms of the Wave Principle and to educate interested parties in the successful application of the Wave Principle. While a course of conduct regarding investments can be formulated from such application of the Wave Principle, at no time will Elliott Wave International make specific recommendations for any specific person, and at no time may a reader, caller or viewer be justified in inferring that any such advice is intended. Investing carries risk of losses, and trading futures or options is especially risky because these instruments are highly leveraged, and traders can lose more than their initial margin funds. Information provided by Elliott Wave International is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your advisor to explain all risks to you before making any trading and investing decisions.