CyclePro Outlook

Fundamental and Technical Market Analysis
For All Markets: Stocks, Commodities, Currencies, Cryptocurrencies

Updated At Irregular Intervals


I would rather be prepared and wrong
than to be unprepared but right!

Current Commentary -- Where Are We Now?

Sunday, July 2, 2017 PM:

US Stock 17.6 Year Cycle

(Update from October, 2007)

Click chart to enlarge.

I originally created this chart in October, 2007 and posted it on CyclePro Outlook with the following description:

This chart clearly notes the 35 year inflation-adjusted stock market cycle (17.6 years down + 17.6 years up). It is not as visible on a standard stock chart, but when inflation is taken into account the cycle emerges... Adding 17.6 years to January, 2000 reveals Q3'2017 as a likely low.

Moving forward from 2007 by 10 years, we are now approaching this critical timeframe. I would like to add that the NASDAQ top was in March, 2000, so 17.6 years from there would target 2017'Q4. But many things have changed that could have a significant impact on how this event plays out. First of all, the central bank QE programs have directly or indirectly dramatically altered every market, particularly stocks with the current "over-bought" condition on a worldwide basis. But now that US Fed has started what it says is a new direction of raising rates at a time when the US economy is not nearly robust enough to support it, this Q3-Q4'17 crash is very likely to happen, BUT, this time it should be different!

What I mean by this is that this Q3-Q4'17 event will probably just be a very short-lived mini-crash or perhaps even a flash crash. The reason is with US having rising rates while the rest of the world is suffering deflation, higher taxes, fear of bank bail-in's, and dramatic demographic changes caused by recent immigrant inflows, where are Europeans going to put their investable cash? The higher rates in US will be attractive because compared to their own zero or negative rates, and while owning US stocks they benefit from both the possibility of stocks prices rising, but also benefit from a rising US Dollar. If European investors look around the world for better opportunities than their own region, the US will appear to them as the best looking horse in the glue factory and therefore a suitable place to park their cash.

Also, regardless what the FED says about providing QE for any stock sell-off, I don't believe they will just sit and watch. The FED will intervene, the only question is how much QE will they provide.

Looking forward, beyond Q3-Q4'17, US stock are very likely to stage a new and very strong (blowoff?) rally backed by investors from outside the US, and then the smaller US "retail" investor will finally get aboard.

Return to the main CyclePro Outlook page.