The State of the Trend

By: George Krum | Sun, Jan 3, 2016
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The SP500 yearly trend remains up since the index made a higher high and a higher low in 2015. The monthly and the weekly trends are flat, but the daily trend is up since the SPX made a higher high and a higher low in December '15. Despite the selloff during the last hours of the last trading day of the year, price is still above the 50% retracement of the last upswing, meaning that it remains in a strong position:

SPX Daily Chart

Market breadth, however, has been steadily declining during the second half of 2015 and is negatively diverging from price. Until this divergence gets resolved one must remain very vigilant:

Market Breadth

Looking at the bigger picture, and using 2016 as an anchor, this is what we can expect in the upcoming year.

The 4 year (Presidential) cycle is mostly bullish. There have been 10 bearish years and 22 bullish. The average gain for the bullish years is 16%, and the average decline for the bearish years is -13%

Year 6 in the Decennial cycle also has a mixed track record.

Year 6 in the Decennial Pattern

Five out of 13 were negative years, seven were positive, and one was break even. Four of the seven positive years occurred in the last 40 years. Looking at the graph, one can make a case for a pretty regular bullish/bearish 40 year cycle, except that 1936 gets in the way.

According to W.D. Gann, year 6 is a bull year in which the bull campaign which started in the fourth year ends in the fall. That's mostly true, assuming it pertains to year 16 in the 20 year cycle (see below).

Looking at the 7 year cycle, the results are split evenly between bullish and bearish years. The nine bullish years produced an average gain of 20.4%, while the bearish years had an average 13% decline.

Year 16 in the 20 year cycle is mostly bullish:

20-Year Cycle

The 30 year cycle is mostly flat (with the exception of 1986).

The 40 year cycle is strongly bullish (with the exception of 1896).

The 42 year cycle is very bearish, with an average decline of 21%.

The 49 year cycle is mixed: two bullish outcomes and one bearish.

The 60 year cycle is flat.

And the 100 year cycle is flat, although the 50 year cycle is bullish.

In summary, the cycle outlook for 2016 is very mixed. There are certain calendar and seasonal periods that stand out, but we'll discuss those in due time. As usual, we'll continue keeping track of the trend, along with market breadth and momentum studies and analytics, and will do our best to keep you on the right side of the market.

 


 

George Krum

Author: George Krum

George Krum
www.citdates.blogspot.com

George Krum is the author of the "CIT Dates" blog, and the following apps:

OddsTrader - combines the power of Hurst Channels with proper risk and position size management. For a web version see OT Signals below.

Gann 9 - the only financial app that allows users to effortlessly apply the legendary W.D. Gann's tools and methods for trading (including the Square of 9).

OT Trend - helps you quantify and forecast the seemingly random ebb and flow of stock, index or mutual fund movement.

OT Fibonacci - automates the process of applying Fibonacci numbers, ratios and time series to any security.

OT Seasonal - allows you to perform seasonal analysis on practically any security from around the world, and to build long-term forecasts and models.

OT Pairs - pairs trading, one of the most successful hedge fund trading strategies, is now available on your smart phone.

OT Pivots - combines the power of pivot lines with cycles to provide you with concise technical analysis and powerful trading signals.

OT Signals - a web app accessible from any browser, tablet or pc. It gives buy/sell/hold ratings for any instrument from around the world, and defines the trend and support/resistance levels.

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