Some folks insist on waiting for Easter to mark the beginning of spring, but the season “officially” began last week with the vernal equinox — when the sun passes the celestial equator making its way into the northern hemisphere and making our days become longer and hotter.
Since I live in South Florida year-round, I always look forward to this particular change of seasons because it means the snowbirds will soon fly north again, making my commute easier. Even better, opening day for the Miami Marlins is just around the corner. Hope truly does spring eternal!
The rhythmic changing of the seasons perfectly represents the many cycles that exist in nature, influencing human behavior, the rise and fall of markets, and even civilizations over the ages.
No one better understood, or was more passionate about, cycles than Larry Edelson. When I first met Larry in 2002, I was already a veteran of financial markets with nearly 15 years’ experience as a broker, analyst, trader, and registered investment adviser for high net-worth private clients. But I knew next to nothing about cycles.
Fortunately, I had Larry as a mentor who took me under his wing and taught me everything he knew about cycle research, historical pattern recognition and his own unique style of technical analysis.
Cycles have a sine wave appearance and exist everywhere in nature, and in markets.
Larry was fond of saying: “Cycles exist everywhere … they are in nature, the change of seasons, the tides of the ocean, in human behavior, politics, and yes, in financial markets.”
You must know where you are in terms of the big macroeconomic cycles to correctly determine whether the market tide is rising or falling and whether you should be playing offense or defense with your money.
Also, you must understand how various cycles interact, converge or diverge with one another: The K-Wave, the Juglar cycle, the business cycle and so on. Larry spent a lifetime perfecting his cycle analysis techniques. And he devoted the last three years of his life to quantifying his work by creating a unique, artificial-intelligence cycles-analysis model, Larry’s crowning achievement.
So where are we now in terms of the big-picture cycles?
Many years ago, Larry correctly identified that we are now in the downslope of the K-Wave, also called the Kondratiev cycle, a big cycle that affects everything. The downswing of the K-wave is characterized by financial panics, banking crises, recessions, and even depressions.
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That is the period we are in now, and it lasts until 2025. It’s no coincidence then that the K-Wave peaked exactly on target in 2007, just in time for the global financial system to implode. That crisis has passed for now, but you can bet there are more to come in the years ahead. In fact, all the major economic cycles point lower into the next decade; a supercycle convergence of historic proportions.
But the result of this convergence may not be what you think. In fact, during turbulent periods like this, markets often behave exactly the opposite of what you might expect. In order to understand what is happening now, and in the years ahead, you can’t rely on the old rules of thumb.
The game is changing, and to preserve your wealth and profit, your investing must change too.
Many investors believe that stocks must fall as interest rates rise. But that’s pure baloney. Look, the Fed has raised rates three times since December 2015, yet stocks are up nearly 15% since the first rate hike. I’ll get into more detail about the stock market-interest rate myth next week.
Cycle Analysis is the first pillar of Larry’s cycles-based strategy. Stay tuned for pillar 2 (Historical Analysis) and pillar 3 (Technical Analysis) coming soon.
P.S. What Wall Street insiders don’t want you to know: Why the U.S. stock market is slated for sudden destruction – but only AFTER it spins off two massive fortunes for investors who make the right moves now: Read more here …