The K-Wave: Heretical Thoughts & Practical Understandings | Tony Plummer

 Credits: MARKET TECHNICIAN - Issue 59 – July 2007.

Nikolai D. Kondratieff: The Static and the Dynamic Views of Economics

The Sixth Kondratieff

Nikolai D. Kondratieff - The Long Waves in Economic Life

Martin A. Armstrong (1989 + 2011): Long Wave Theory - Kondratieff Wave Already Bottomed?

The Kondratieff Cycle And Subdivisions

The economic long wave is a boom and bust cycle driving the global economy, first discovered by Russian economist Nikolai Kondratieff in the 1920s. Kondratieff was researching debt, interest rate, production and prices when he discovered the economic long wave. The Long Wave Dynamics approach calculates the ideal Kondratieff long wave cycle as 56 years in length, but it can run long and short in Fibonacci ratios to the ideal length in time.

The current long wave is of the long variety and began in 1949. Current analysis suggests that the current K-wave will end in 2013, running eight years and a Fibonacci ratio of 14.5% longer than the ideal 56 years. 

The late renowned Harvard economist Joseph A. Schumpeter, author of the book Business Cycles; A Theoretical, Historical, and Statistical Analysis of the Capitalist Process, believed that the economic long wave is the single most important tool for economic prognostication.

The current long wave is now in the Kondratieff Winter season. Most investors wish they had access to this long wave season chart in 2007. Every long wave has four seasons, just like a year. The approximate length of a long wave season is 14 years, but they can run short and long. Each season typically contains four Kitchin cycles with an ideal length of 42 months. However, long wave seasons can have fewer or more Kitchin cycles than the normal four.

www.escholarship.org

 

















































The Kitchin Cycles: Harvard’s Joseph Schumpeter concluded that every long wave was made up of 18 smaller business cycles or Kitchin cycles. In more recent years, with more sophisticated charting technology and market analysis, the research conclusions of market analyst P.Q. Wall, that the long wave is make up of only 16 market cycles, has been validated. This is an essential distinction in cycle research.

Schumpeter’s model of how all the cycles worked together to produce long waves included Kitchin cycles (the regular business cycle of 3-5 years) and Juglar cycles (7-11 years), with three Kitchins in each Juglar. Schumpeter also wrote of the Kuznets cycles (15-25 years), but didn’t put them in the charts below. The chart depicts the flow of the Kitchin and Juglar cycles integrated in 56-year long wave cycles. Note that Schumpeter’s model presented 18 business cycles in a regular long wave. See: schumpeter_business_cycles.pdf

Market cycles differ from business cycles in that they are identified on an index chart, and not necessarily in the economic data as a business cycle. However, they often correlate to the regular business or trade cycle. Every long wave appears to be made up of 16 market “Kitchin” cycles.

The chart above demonstrates our count of the 15 Kitchin cycles that have come and gone in the current long wave since 1949 using stochastics. We are currently in cycle number 16, with its expected conclusion in the year 2013.

The 16 Kitchin cycles that make up a long wave are ideally 42 months in length, but they are rarely ideal and fluctuate in length both short and long, often in Fibonacci ratios of their ideal length in time. In each Kitchin Cycle there are ideally 36 dips or 36 Hurst "5 week" lows.

The Kitchin Third: The ideal Kitchin cycle is 42 months or 1277.5 days in length, the ideal Kitchin Third is 14 months or 425.83 days. A Kitchin cycle is made up of 9 Wall Cycles, therefore each Kitchin Third is made up of three Wall Cycles. PQ Wall had a general rule of third last and weakest. This goes for the final Kitchin Third in a Kitchin Cycle, but also goes for Wall Cycle #3, #6, and #9, or the final Wall Cycle in each Kitchin Third. The Kitchin Cycle often unfolds in the three Kitchin Third sections, but the Kitchin Third is not typically as distinct as the other cycles.

The chart displays the full Kitchin cycle #14 in this long wave, which began on September 1, 1998 and ended on October 10, 2002. This Kitchin cycle, like most in the current long wave, ran long. Therefore, the Wall cycles and Kitchin 3rds also ran longer than ideal. The nine Wall cycles and three Kitchin 3rds are all clear in this Kitchin cycle

Schumpeter’s model of how all the cycles worked together to produce long waves included Kitchin cycles (the regular business cycle of 3-5 years) and Juglar cycles (7-11 years), with three Kitchins in each Juglar. Schumpeter also wrote of the Kuznets cycles (15-25 years), but didn’t put them in the charts below. The chart depicts the flow of the Kitchin and Juglar cycles integrated in 56-year long wave cycles. Note that Schumpeter’s model presented 18 business cycles in a regular long wave.

The Wall Cycle (aka 20-Week Cycle):  The Wall cycle is the ideal trader’s cycle. Accurate technical analysis of the Wall cycle is essential for stock market traders. If you divide the ideal 56 year long wave by 144 you have the ideal Wall cycle. The mathematical relationship of these cycles indicates the Wall cycle is a miniature long wave. The approximate 20 week cycle (141.9 days) fluctuates short and long by Fibonacci ratios to the ideal length.

The chart presents the Wall cycle that ran from July 8, 2009 to February 5th 2010. The Wall cycles are currently expected to be running long due to government stimulus and aggressive monetary policy. If the ideal Wall cycle is 141.9 days, then an exact 50% extension of that is 212.85 days. July 8, 2009 plus 212.85 days is February 5th, 2010.

The Quarter Wall Cycle (aka Trader’s Cycle)

This chart is an example of the four Quarter Wall cycles in a Wall cycle in the DJIA and 8,5,5 stochastics. This is the Wall cycle that ran from October 10, 2002 until March 12, 2003. Tracking the Quarter Wall cycle is of critical importance for traders.

As the name implies, the Quarter Wall cycle reflects that the Wall cycle tends to unfold in four sections, or Quarter Wall cycles. The Quarter Wall cycle is a mini version of the long wave season. The ideal Quarter Wall cycle fluctuates in Fibonacci ratios in time relative to its ideal length of 35.475 days.The Quarter Wall is the critical cycle for traders.  Just like the other cycles, the Quarter Wall will run short and long relative to the ”ideal” in Fibonacci ratios in time. The forecasting power of the Quarter Wall forecasting tool is often startling.

"There is a tide in the affairs of men.

Which, taken at the flood, leads on to fortune;

Omitted, all the voyage of their life

Is bound in shallows and in miseries.

On such a full sea are we now afloat,

And we must take the current when it serves,

Or lose our ventures."

 William Shakespeare

"By the Law of Periodical Repetition, everything which has happened once must happen again, and again, and again - and not capriciously, but at regular periods, and each thing in its own period, not another’s, and each obeying its own law … The same Nature which delights in periodical repetition in the sky is the Nature which orders the affairs of the earth. Let us not underrate the value of that hint."

Mark Twain