When Will The Bull Market End? – 14 November 2014

The media is full of speculation about how long this bull market is going to last, and so I thought I’d throw in my two cents worth!

Of course the concept of “how long the bull is going to last” depends on your time-frame, but the bull market that everyone is discussing, and that I am writing about here is the move that started in March of 2009.

There is a wonderfully complex thought process that lies behind the Hurst Cycles logic that is used to answer this seemingly simple question. Complex but not difficult, it is bit like holding the many interlocking pieces of a jigsaw puzzle in your mind.

I describe the full process on the Hurst Cycles blog here, but if you’re short on time, here is a summary:

Because of the way in which cycle shapes in the markets follow a sequence, we can state that the current 9-year cycle peak will also be the peak of the current 54-month cycle, which will itself be the peak of the current 18-month cycle … and so:

The answer to our question: we expect the bull market to continue until about March 2015 (where the first peak of the 18-month cycle is likely to form). There will be another run up which will complete in about October 2015, but it is unlikely to exceed the earlier peak.

This logic is all based on the sequence of cycle shapes in the market. How reliable is that?

Here is an analysis of the GBPUSD (British Pound vs United States Dollar) showing how the sequence of 18-month cycle shapes has played out as expected in the current 9-year cycle:

 The 9-year cycle in the GBPUSD

And here is that same period in the S&P 500:

 The 9-year cycle in the S&P 500

Do you notice the anomaly? The 18-month cycle from October 2011 to November 2012 is not bearish. It is an inconsistency that has bothered me for almost three years.

It is either explained by accepting that the markets aren’t perfect, or by accepting that there is the harmonic echo of a six-year cycle at play (as discussed here), or perhaps this analysis is simply wrong.

I would love to hear what you think. Have a great week and profitable trading!

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2 thoughts on “When Will The Bull Market End? – 14 November 2014

  1. The work of Terry Laundry and his T Theory of similar time spans which can be determined by an oscillator (NYUD with MACD 19,39 applied) and via moving averages to show the cycles (price dips into the MA on S&P 75 day cycles etc.) Also uses Keltner Bands to show His and lows in trend during longer cycle periods)

    Basically it comes up with very similiar answers –

    Market is presently in giant megaphone pattern

    The T Theory® “M-Cycle” is Bullish on Equities into Early 2014
    By Terry Laundry
    Over the past two months I have been forced to conclude that the “M-Cycle,” averaging some seven years in
    duration from low to low, is the dominant cycle for the current bull market which began from the early March 2009 low. There are a number of important conclusions I will be drawing from this assumption, all of which are derived from the “M-Cycle” Plot below.
    The M-Cycle Plot was initially developed for the 2011 Seminar and now resides in the T Theory® Encyclopedia.
    We had noted the behavior of lows coming at approximately seven year intervals over the last 200 years of US Equity History. Of greater interests was evidence that this “M-Cycle” had become more regular in duration since the 1974 low. The next low might be in the 2016 time period as noted in the chart.
    A key point in my current thinking came out of the Edson Gould Megaphone formation. The simplest conclusion
    was the likelihood of an all-time new high before the current bull market was over. However I became more
    interested in the Gould philosophy expressed at the end of his life and the lessons it provides. Namely new bull markets do not end until the equity market enters a speculative phase and conversely new bear markets do not end until a selling panic is seen. We already saw the second lesson in the “M- Cycle” chart since each of these cycle lows are well-known panic lows that quickly led into a new bull market trend.
    However I never thought to look for the speculative peaks as the more logical signs of the ending of an ongoing “M-Cycle” advance. In this chart I note that each new bull market rising out of the recent “M-Cycle” lows continued late, almost five years, into the 7-year interval. Except for the 1995 example, all late advances ended in speculative peaks. Further, these speculative peaks had occurred at roughly regular intervals with the subsequent bear market rather short, roughly two years duration being typical.

    The “4 Year” Cycle vs the “7 Year” T Theory “M” Cycle

    This implies that an “M-Cycle” lasting some seven years could provide close to five years of upside opportunity. So it would seem that a 5-year plan for equity growth is advised from an “M-Cycle” perspective. The Risk Gauge™ should be able to warn us of corrections within this bigger picture, so we are not likely to be “side swiped” by any serious economic problems. The short term technical refinements are then left to the Short Range T picture for resolution.

    I now know how to use the stockcharts.com tools to generate the basic volume oscillator concept which requires developing the difference between two exponential moving averages of a net change in volume or price. We will experiment with different oscillators on the ETF price and the fund’s relative strength in ways that help to determine turning points more accurately and more reliably. When this work is completed, we will have the world class investment package for Pro subscribers.

    One final comment, the commodity market, which is being enthusiastically embraced by a number of money
    managers, will not prove above average in performance over the next few years. As my next chart notes, the Big Copper MegaT picture is not favorable and the red Dow Jones Commodity Index is not showing any great upside momentum.

    I do not see how the Mega-T picture for copper can resurrect itself as the last MegaT#2 top is so recent and the correction was so short lived. Also the Red Dow Jones Commodity index is quite weak.
    This has a number of interesting conclusions that are worth keeping in mind as long as the price of copper cannot get above the rising tops dotted trend line in the chart. I believe this trend line is the maximum for copper given the T Theory Forecast given by the two Mega-Ts.

    In any case, continuing weakness in Copper and commodities implies slow or low economic growth which will
    limit the profitability of many equity investments and could produce an erratic uptrend for the final advance.

    • Thank you for sharing that. Could you include reference to the source? That way interested readers could take a look at the original material.

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