Source: 17.6 Year Stock Market Cycle

 

Interesting take on the longer term Secular Bear Market Vs. Cyclical Bull Market, via Kerry Balenthiran:

“My research has identified that a 17.6 year stock market exists within the markets consisting of downtrends lasting 2.2 years and uptrends lasting 4.4 years (2 x 2.2 years), with a combined cycle length of 17.6 years. I have called this cycle the Balenthiran Cycle and demonstrate how the intermediate turning points match stock market behavior going back to the early 1900s and extrapolate the cycle forwards to provide a market roadmap of the next secular bull market to 2035 and subsequent secular bear market to 2053.”

A few caveats: The 17.6 year cycle has been bantered about for a long time by various people. (See “previous” below).

Second, I would add is that cycles can be interrupted by external events — like Bailouts, QE, etc.

Last, the world changes over time, and I doubt that any oscillation period dependent upon humans would stay all that consistent over decades and centuries.

 

 

 

Previously:

Is the Secular Bear Market Coming to an End?  (February 4th, 2013)

Bull Markets Since 1871: Duration and Magnitude (April 25th, 2013)

Economic Cycles and Investing (December 28th, 2011)

Psy Cycle (Updated) (December 20th, 2011)

The 56 Year Benner Cycle  (August 19th, 2010)

Art Cashin on Secular Cycles (July 8th, 2009)

Category: Cycles, Markets

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

8 Responses to “Balenthiran 17.6 Year Cycle”

  1. catclub says:

    1. That is a 35 year cycle.
    2. the 2007-2009 red period= 2.2 years is actually 1.4 years
    3. tell me again why the two years from 2011 to 2013 are marked as red bear years.

  2. ComradeAnon says:

    Dow 36,000 here we come!

  3. GeorgeBurnsWasRight says:

    Thanks for the link.

    His website makes the audacious claim that we’ll have a market low by the end of this year, though a higher low than the one in 2009.

    I’m far from an expert, but I’ll take the other side on that prediction.

  4. wally says:

    17.6? Hmmm, that’s pretty precise. Looks like you could set your watch by it.

  5. Thanks for your comments, addressing them in turn:

    Yes the full cycle from top to top is 2 x 17.6 years, but each half has its own distinct pattern. There is already some recognition of a 17.6 year stock market cycle, notably by Art Cashin, so it made sense to refer to it as a 17.6 year cycle.

    The 2.2 year and 4.4 year increments refer to bullish and bearish phases and not specific turn dates. Therefore while the 2007 to 2009 top to bottom was shorter than 2.2 years, the cycle shows a top in 2007 and bottom in 2009 based on this historic pattern going back 100 years for the DJIA.

    The period 2011 to 2013 is indeed shown as a bearish period. These bearish periods can either result in a significant sell off or overall sideways movement. I completed the research on my cycle in early 2011 and calling for a 2011 high turning point was the first forecast that I made using my cycle. When I completed the manuscript for my book prior to it being published I kept the original forecast as that is the best forecast based on 100 years of history. I am well aware that the bullish periods are 4.4 years and this has worked out well in the period 2009 to 2013. However based on my study of the 1970s and 1940s I stated in my book, published in March 2013, that this period would see a significant buying opportunity that would be the last major low of the secular bear market and offer a great place to buy in order to ride the next great bull market in stocks. The August 2011 low may be the low of this period, as I specifically say in my book that the low sometimes occurs at the beginning of the period, or the low could be ahead of us. But I do think, based on my research, the nominal low for this 17.6 year bear market was reached in 2009 and we are not headed for those levels again.

    I remain alert for a significant correction ahead as the US/UK markets have become historically overvalued (using CAPE) and exuberance and leverage abound based on QE addiction. Sustainable secular bull markets are not built on emergency central bank policies, stagnant wages, stubbornly high unemployment (specifically youth unemployment) and artificially low interest rates. Don’t get me wrong, I understand the need for central bank intervention, I just don’t think this is a healthy bull market in stocks.

    Whilst completing my book I came across an article from 1999 by Warren Buffet in Fortune magazine, Buffett talks about his expectations from stocks over the next 17 years and discusses past performance for other 17 year periods such as 1981 to 1999 and 1965 to 1981. Buffett stated that he expected a 4% annual real return, at best, until 2017. Why does Buffett specifically mention 17 years, why not 15 year or 19 years? Also Buffett rarely mentions his outlook for the future; I believe he was ringing the bell at the top.

    http://money.cnn.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm

    Back in 1966 Buffet closed his partnership to new money in 1966 as he grew concerned about elevated stock prices and he liquidated it completely in 1969 because he felt that he was unable to find any bargains in the market. I’d argue that Buffett is a market timer as well as a value investor.

    I know this sounds crazy to people who are unfamiliar with cycles, and cycles are not to be used in isolation either, but I started on this journey when I was reading Hot Commodities by Jim Rogers. Rogers mentions the commodity cycle of 17/18 years that goes back hundreds of years. He sites the excellent research of Barry Bannister from 2002 where Bannister argues that we are in a new secular commodities bull market that will end in 2015, driven by long term underinvestment and supply issues.

    http://www.upsecurities.com/resources/documents/commodities/LM%20The%20Inflation%20Cycle%202002-2025%204-19-02.pdf

    I have obviously used the cycle to try and paint a picture of what the future may look like and there are other audacious claims in my book such as the gold/commodity markets will peak in 2015 and we are just in a final cyclical bear market within the long term commodities bull market. Also I think that the next secular bull market in stocks will take us to Dow 100,000 in 2035 before we see another 17.6 year bear market, driven by a new 17.6 year commodities bull.

    We have made new nominal highs in most stock markets but the real return after inflation is still negative, excluding dividends. I am expecting the end of the secular bear market in stocks, in real terms, to be 2018 and I anticipate a return of inflation to get us there and finally force the Fed’s hand on QE.

    Have a great weekend,

    Kerry