I maintain that following just the 3 major cycles is usually sufficient to be in front of the markets always.
Those 3 cycles are the Decennial or 10 year cycle, the presidential or 4 year cycle and Armstrong's 8.6 year cycle.
First a review of last year to establish some credibility although you can go back as far as you wish.
Late Feb 2007 saw the first of these cycles, Armstrong's, top, and we had the Shanghai drop but then we recovered as the other 2 cycles were still on the up.
By mid July 2007 those other 2 cycles had peaked, and I was lucky enough to liquidate equity holdings on the exact day, and so the indications were that being long again should wait till Mar 2008.
Why?, because the 3 cycles were now down and yes I didn't see the blowoff into Oct 2007.
With the 3 cycles down, the first to bottom was the decennial, due Dec 2007/Feb 2008 and we got Jan 2008.
The second to bottom was Armstrong's, due at Easter in March and that is when most lows were seen.
Knowing that the 4 and 10 year cycles match up every 20 years and looking at 1988 1968 1948 etc also indicated mid March 2008 as the important low.
From mid March we now had 2 of the major cycles up and only the 4 year cycle down and due for a low about May or even early June, so any pullpack here should be a higher bottom and then everything rosey into next year.
That may well be the case and then the scenario is Armstrong topping in April 2009 with a 26 month decline, that decline being equivalent to Sep 2000 to Nov 2002 in his cycle terms. The other 2 cycles suggesting an Aug 2009 top and a Oct/Nov 2009 top so that from Nov 2009, the picture is very bleak indeed all through 2010.
Adding to that scenario is the added longer term 40 year cycle that suggest we are still in a topping phase that will see serious downside from a peak over the next year or three.
And adding to that is the 17 year consolidation/bear period the US should be seeing from 2000 just like from 1966. 17 years up/sideways/up/sideways etc.
So can the markets rally hard from a May/June decline now into April or even Nov next year?
Maybe it can, but that 17 year consolidation plus the 40 year topping phase suggests new all time highs are dubious.
As for XJO, there is a bit of a problem here in May.
There has been a distinct 62 month cycle of alternating lows and highs from July 1982 with only the Jan 1998 high failing to conform but causing 2 years of sideways action.
That cycle has May 2008 as another possible major top. Perhaps it means commodity producers suffer a downturn into Oct/Nov this year while the US can soar.
Whatever the case, it seems that getting back over recent rally highs in a sustained way supports the conventional view that the 2007/8 correction was just a standard size decline and a standard cycle decline and that the 3 major cycles rule as they have since I have been using them for 20 years.
Sure, one can draw parallels with 1974, as being 8 years after 1966, as 2008 is after 2000, in the 17 year consolidation, both testing the previous high and failing in the US.
So I can't rule out a severe decline from here, and May is the pivot time, but it seems to me the picture is a struggle up into next year, with the best of the up move actually happening from now for 4 months or so.
(20min delay)