Thursday, November 11, 2010

Dow Super Cycle Count

This is my count for the DOW Super Cycle (V) starting in 1932.

The entire sideways movement from 1966 to 1982 is Cycle Wave IV, a combination correction.

The October 2007 high is the top for the Cycle V,  Super Cycle (V) and Grand Super Cycle III.

The Super Cycle (V) lasted 75 years, from 1932 to 2007.  Cycle V starts in 1982 and lasts for 25 years, dividing the entire period in a 50:25 or 2:1 ratio.

The meteoric rise of the stock market in Cycle V coincides with the birth of Wall Street's mortgage securitisation  machine. This enabled increased lending by the banks as most mortgages were no longer on Bank Balance Sheets. Massive credit expansion meant strong GDP growth and strong corporate earnings growth.

Significant departures from EWI's count :
  • Cycle IV does not end in 1974, but 1982.
  • Primary 1 starts in 1982, not 1974. Looks much better as a thrust up from a triangle that way.
  • 1987 crash is not Primary Wave 4, but a running flat, Primary Wave 2 correction, ending at the Oct 1990 low.
  • Primary 3 is extended, not Primary 5.
  • The Mar 2000 to Oct 2002 correction is Primary 4, not Cycle a.
  • Oct 2002 to Oct 2007 is Primary 5, not Cycle b.
Issues with EWI's count :
  • Size of proposed Cycle Waves a & b does not look like that of a Cycle Wave. If Cycle a had dropped DOW to 2000-3000 range, it would look comparable to Cycle V.
  • Cycle a needs to be a zigzag. But this correction from Mar 2000 to Oct 2002 is nearly impossible to count as a motive wave. It counts best as a series of zigzags, a corrective pattern of WXYXZ.
  • Primary 1 off of 1974 lows hardly has any thrust. It does not even rise above the upper line of the triangle.
  • Primary Wave 1 off of Oct 2007 highs has already exceeded the proposed Cycle Waves a & b.
  • Primary Wave 2 off of Mar 2009 lows is already bigger than the proposed Cycle a on the DOW.
  • Size of Primary Waves 1 & 2 from the Oct 2007 top, supports the Primary degree of  Waves 4 & 5, not Cycle a & b.
  • EWI was projecting DOW 400 in the nineties. Their proposed counts clearly reflect rushing to that goal at that time. Their labeling of Primary 1 & 2, 3 & 4 helped them declare 2000 as "The Top" sooner, and hence the shortest path to the DOW 400 target. Their call for DOW 400 has still not materialised.  
  • EWI's cycle labeling of a,b and c is incorrect use of the fractal. If they want to use a,b and c they would have to be super cycle degree, not cycle.

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