U.S. Equity markets have been in a correction mode for better part of 6 weeks and this coincides with the 9 month cycle lows. Its been said that market cycles are more of an art than science but I’ve followed many of them for years and have come to the conclusion that while I may not understand exactly how they work, they’re worth paying attention to.
Within the next few weeks or so we have several cycles that are converging between now and June. It appears that any market trough developing soon will not be considered a major market low but a normal run of the mill trough. However, the matter of significance is the post-cycle trough which could be a major move higher, probably to 1500 on the S&P 500 or 11% by the end of the year.
The explanation for the trough and rally will, at present be open to interpretation. For those that fear Europe being our market’s downfall, the odds are quite low that Europe will derail the U.S. since its extremely rare that a major issue be discounted in stock prices more than once. One other issue that made news over the weekend is China lowering reserve requirements. China has been attempting to slow economic growth for close to two years and they may have finally seen enough slowdown to take their foot off the economic brake.
As the chart reveals the 9 month cycle typically is a counter move to the primary trend. In other words, if markets are in rally move (as they are at present) the 9 month trough is a very nice entry point whereby the rally eventually resumes. In a bearish trend, the reverse is true. The 9 month cycle is usually not The tipping point for a change in the primary trend.
Overall, all of our models and timing systems remain positive. So far our present pullback resembles a garden variety pullback seen once or twice a year. Unless the character of the retreat changes in character for the worse I’d view this as an opportunity to add new funds or increase equity exposure.
No Positions mentioned