DJIA vs 18 Year Cycle | Cyclic Vibrations

Ahmed Farghaly (Nov 16, 2016) - The peak of the 18 year cycle should be
expected sometimes in late January early February 2017 (see also HERE)

Share Prices from 1509 to 2016 | Tide in the Affairs of Men

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 | Julius Caesar: Act 4, Scene 3, 218 – 224.

High Resolution *.pdf HERE | Source: HERE

The Pattern of US Bankruptcies | Cyclic Vibrations

Ahmed Farghaly (Oct 22, 2016) - I found an interesting pattern in the Gold Miner's index. I realized that at the beginning of the previous two Kondratieff waves the US had defaulted on their obligations. This is the reason why a human brain is superior to spectral analysis, we tend to spot patterns earlier. In 1933 the US Treasury was official declared bankrupt after the emergency banking act was voted into law by congress. "The Emergency Banking Act succeeded in abrogating America’s gold standard and hypothecated all property found within the United States to the Board of Governors of the Federal Reserve Bank." This bankruptcy occurred after world war one as visible on the picture above. The Vietnam war was the culprit of the second American bankruptcy with the closing of the Gold window in 1971 by president Nixon. So much money was printed to fund the war that there was no way the US could redeem holders of US dollar with Gold at the pegged rate of $35 an ounce. We once again have the same pattern recurring at the time of writing. We had the Iraq/Afghanistan war the debt of which has become to big of a burden to service and history will once again repeat with yet another bankruptcy in a few short years. This will obviously have a devastating impact on the entire world since US Treasuries are the largest single asset that people own world wide. I wonder how China will react to such a bankruptcy but I guess only time will tell. I am so certain that this is going to occur not only because of the pattern that we see on the Gold Miner's index but that of Donald Trump's upcoming presidency. 

I analyzed all the similar cyclical circumstances and under all of them the president of the United States was a republican. Those cyclical circumstances include 1861, 1881, 1971 and 2001. This gives us reason to believe that without question the next president of the United States will be Donald J. Trump. We can also look at Hillary Clinton's history to discern if she is likely to make it to the White House. First, We know that the similar cyclical circumstance in terms of the 54 month wave saw Hillary Clinton lose in the primaries against Obama. We also know that she lost against Obama once again in the similar cyclical position in terms of the 9 year cycle. We also know that she left the White House in the similar cyclical circumstance in terms of the 18 year cycle. Now that we are certain that Donald J Trump will win the election we can combine that with what we have discerned from the Gold Miner's index with his history of Bankruptcies. Donald Trump filed for bankruptcy a total of 6 times the last of which was in 2009. W.D. Gann said that the highest correlations occur with the most recent similar cyclical circumstance. The 2009 low is expected to reoccur in 2017 and hence we can expect a bankrupt United States government before the end of next year or the year after at the latest.

Trump's plan for his first 100 days in office (HERE)

Financial Crisis and Market Panics | From 1500 to the Present

Source: @Stock_Trend_Chg

DJIA: Bullish Into Q1-2 Next Year | Cyclic Vibrations

Ahmed Farghaly (Aug 19, 2016) - I am expecting a peak [in the DJIA] in the first-second quarter of next year [2017] and I believe it will be the peak of this century [...] Volatility will likely make a new historic high once the peak is realized as will be presented shortly. Let us first look at the DJIA from an Elliott wave perspective: 

Enlarge

I believe that we are terminating an impulsive advance from an Elliott wave perspective, this impulsive advance is the fifth wave of grandsupercycle degree [...] Another scary aspect of the chart above is the extended fifth wave that occurred from the lows in 1974 to where we stand today. R.N. Elliott warned about what usually occurs after a fifth wave extension since it is usually followed by a crash. Once we look at the projection lines we will notice such an outcome is highly likely based on our volatility forecast. The target for the correction after a fifth wave extension is the range of the second wave which brings us to the 1000-770 price range. Such a forecast for the Dow is certainly scary and I am not brave enough to make such a cataclysmic call which is why I will wait for the patterns to unfold to obtain more accurate price targets. It is important to know that the US stock market is likely to be the out-performer as indicated in one of my previous posts (The American S&P and German Dax ratio) in which I analyzed a ratio of the DJIA with the German DAX. If such a target is expected in terms of the DJIA one can only imagine what will occur to the European indices. I still prefer a German DAX short once the peak is in since one will make money from a higher EURO and a larger percentage drop. Let us now take a look at the shorter term wave count.

The shorter term wave count suggests that the DJIA is in its fifth wave of intermediate degree to terminate the primary degree rally from 2009 which will in itself terminate a cycle degree advance that started in 1974 which will itself terminate a supercycle degree advance that started in 1932 which will itself terminate a grand supercycle degree move that started in 1784. The cycles mentioned on many previous posts on this blog support that fact. I believe that such a large and historic top will end in weakness rather than strength. This is why I am preferring an ending diagonal scenario for the fifth wave of intermediate degree. I am certain that the correction that is about to unfold will be the largest correction in US history. This is a time to be cautious from equities and to try our best to avoid the calamity.

The first chart below presents an overlay of the 1920s bull market with the one seen since late 2011. Both bull markets occurred under a similar cyclical circumstance hence their high correlation (9 year cycle). The correlation is almost 80%! This projection line suggests that a peak is likely in the first quarter of next year. This conclusion is supported by a projection line of the 18 month cycle that started in 1971 which is presented below.

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The correlation of the 18 month cycle of the early 70's bull market while gold was selling off is very high and similar to the bull market that started early this year (middle chart above). They both occurred under a similar cyclical circumstance and hence their 80%+ correlation. Both indicators are bullish going into the new year and suggests that the current 'worst' part of the year is likely to disappoint those that strictly follow the annual cycle as it has proven to do so already.
 
The third chart above shows my volatility projection as well as the projection line of the late 20's. The volatility indicator was obtained from two 9 year cycles of a similar cyclical circumstance to where we stand today. The volatility projection suggests that the crash is likely to be drastic going into the low that is expected in 2020 which is when peak volatility is expected.

The 162-Year Cycle in Stocks and Commodities Since 1555 | Ahmed Farghaly

 Stock Prices 1509 to date.

 

The chart above begins at the millennial low in 1555, followed by a remarkable sequence. I first discovered the 162-year cycle by drawing a trendline between two consecutive lows of the 54-year cycle, specifically the lows of 1842 and 1896. A break in such a trendline suggests that a larger cycle has turned, and indeed, the trendline was broken during the 1929-1932 crash. This provided me with an early indication of the 162-year cycle's presence. I assumed it was a 162-year cycle because the first 54-year cycle used to draw the trendline marked a rally off a bear market that lasted 64 years, making it an ideal starting point. I then confirmed my hypothesis by examining wheat prices and, later, commodity prices, which led me to conclude that the existence of the 162-year cycle is no longer a hypothesis but a fact.

The combined chart offers further evidence of this cycle’s presence. Notice how neatly the first 324-year cycle subdivides into two 162-year cycles. The trough of the 162-year cycle is precisely in the middle of the 324-year cycle. Upon closer inspection, you’ll see that both 162-year cycles subdivide into three 54-year cycles, reinforcing our conclusion that the Kondratieff wave is the third harmonic of the 162-year cycle. After the trough in 1784, we experienced three 54-year cycles, ending with the crash of the late 1920s, which marked the trough of the 162-year cycle. What followed was the greatest bull market in modern history, and it is unfortunate that we are nearing its end. The peak of the last 324-year cycle occurred in the third 18-year cycle of the second 54-year cycle of the second 162-year cycle, which is where we find ourselves today. The likelihood of further translation beyond the previous 324-year cycle is slim, considering that the influence of the 972-year cycle has leveled out since the 1930s.

The Elliott Wave structure is also quite interesting. What stands out on the chart is the fact that we had a fifth-wave extension in the entire advance since 1784. Even more intriguing is that the move from 1932 also featured a fifth-wave extension. According to the wave principle, fifth-wave extensions are typically followed by crashes. Commodities offer excellent examples of this phenomenon, as their dramatic crashes are often the result of a fifth-wave extension. 

 

Quoted from:
Ahmed Farghaly (2016) - The 162-Year Cycle in Stocks and Commodities Since 1555.

2015 in J.M. Funk’s '56-Year Cycle of Prosperity and Depression'

In 1932, J.M. Funk (1892-1941), an American aviation engineer, introduced his concept of a Cycle of Prosperity and Depression, proposing a 56-year cycle in US economic activity. Although this concept garnered some attention during his lifetime, it was largely overlooked by mainstream economists and academia. Funk considered the cycle so significant that he delivered numerous lectures and published a pamphlet, The 56-Year Cycle in American Business Activity, to promote his theory. While the cycle might have faded into obscurity, it was revived through the writings of financial astrologer LCdr. David Williams (1947, 1959, 1982), who extensively discussed Funk's work, helping to bring the theory to a broader audience. Funk was one of the few individuals to predict both the economic upheavals of the early 1930s and the subsequent recoveries in 1933 and 1935. David Williams recounts: 

"During the mid-1930’s, a Middle Western cable manufacturer came into the author’s office in New York and presented him with a pamphlet on Philocracy, written in 1932 by J. M. Funk of Ottowa, Illinois in which the latter propounded a theory of Economic Cycles, which he stated are, “a series of events (produced by ‘cause and effect’) which recur in the same order.” [...] Funk stated: “A knowledge of the present and history is therefore a key to the future. Until Government Standards are based upon the recognition of exterior forces (which govern human conduct) history will repeat itself. THE CHART WILL PREDICT THE FUTURE because the human make-up includes, aspiration, greed, intemperance, fickleness, etc., which traits are governed by endurance; endurance is governed by exterior forces which fluctuate in rhythm and tempo as constantly as the Sun in its journey through the heavens.” The author redrew Funk's chart [...], which was used to illustrate a lecture delivered April 16, 1947 at the Henry George School of Social Science, New York. The results show conclusively that regardless of wars, rebellions, population changes, industrialization, technological, and monetary changes, American business has been dominated by a 56-year rhythm. In each 56-year period three major panic periods occur at 20-20-16 year intervals. While other panic periods intervene, no discernible pattern is evidenced."

 Reference:
J.M. Funk (1932) - The 56-Year Cycle in American Business Activity. Privately published. Ottawa. IL.

LCdr. David Williams (1947) - Rhythmic Cycles in American Business. 

LCdr. David Williams (1959) - Astro-Economics.
LCdr. David Williams (1982) - Financial Astrology.

 

 » [J.M. Funk] claims that February 6, 1933, will be the date for a definite improvement

in business and general economic conditions in the United States. «

  

 La Salle Post Tribune

Monday, January 9, 1933
 

Depression Ends February 6 Says Ottawa Man Here

'Philocracy' is the title of an address that will be made before the Illinois Valley Manufacturers' Club and Chamber of Commerce membership Tuesday noon by J.M. Funk of Ottawa, statistician, inventor, and manufacturer, who has reduced the cycles of prosperity and depression to a mathematical basis and claims that February 6, 1933, will be the date for a definite improvement in business and general economic conditions in the United States. 

 

 The stock market actually reached what is today considered the low point of the 

Great Depression in the Dow Jones Industrial Average on Wednesday, February 8, 1933.

Manufacturers' Club Hears Unusual Economic Analysis Given by J.M. Funk

It is not a mystic or fortune-telling device but a practical aid to business, with a dramatic appeal that carries with it a message of courage and optimism. In adopting the title of 'Philocracy,' the inventor explains that the new thought being advanced by the "technocrats" and "economists" leaves the average citizen and businessman in a state of confusion, while 'Philocracy' is based on facts and strives for sound and reasonable conclusions. The cyclical regularity of prosperity and depression is demonstrated as occurring every fifty-six years, regardless of every obstacle and in spite of them. Reports from Ottawa men who have heard this address explain 'Philocracy' as one of the most interesting and fascinating propositions they have studied. It is said to be entirely different from all other forms of thought on business. Mr. Funk especially invites the interest of men and women who are students of government, business, philosophy, and higher mathematics to check his conclusions against the historical records of this nation over the past one hundred and fifty years. He encourages them to observe the sequence of parallels that apply to business, just as they do to bridge building, steam engines, airplanes, or any other type of engineering.

 

 James Morris Funk, 1933.

The nation's depression will officially end on February 8, with a minor reaction, followed by a major reaction on March 19, J.M. Funk, Ottawa disciple of 'Philocracy,' told members of the Manufacturers' Club and the La Salle Chamber of Commerce at a joint luncheon meeting today. Basing his statement on a formula he had prepared using every possible figure in the economic structure of the nation, Funk declared that periods of depression follow in regular intervals of 56 years. With that information in hand, Funk predicted that 1949 would be a panic year, due to the fact that bonds, debentures, war costs, and other payments were coming due that year.

 

Proved by Charts, Claims Funk

“The chart,” Funk declared, “proves beyond question that humanity does and will not profit by experience; that everything in economics is governed by cause and effect, action and reaction. The chart further proves that panic and depression are the result of production setting a pace that consumption cannot follow. It will be noted that after 56 years each economic event is repeated. Bound up in this lapse of time are indicated the governing forces of human endurance, both mental and physical, which are then manifested by new living standards, customs, and manners. A study of the year-to-year accumulation of surplus production will demonstrate that these cycles repeat, proving that economic patterns are consistent over time. The economic cycle is a chain of unbroken cause and effect events, which, when transposed into common expressions, occur in the order: Depression produces thrift; thrift produces confidence; confidence produces investment; investment produces activity, and activity is prosperity; continued prosperity produces easy credit, easy credit produces over-production; over-production produces fictitious sales and such fictitious sales produce fictitious collateral; fictitious collateral produces an economic structure of fictitious paper value. When the structure is so recognized, it is abandoned. Panic prevails and depression is produced. The depth of depression depends upon the magnitude to which the fictitious condition expanded. Until a financing basis is inaugurated to govern each endeavor, the scientific diversification is workable. The demand for referendums is heeded and facilitated. So long as the organized minorities control legislation, the political payrolls are in excess of services required or efficiency rendered, labor, organized or otherwise, is unscientifically compensated. So long as there be dabbles in countries of different general standards, so long as bonds and debentures are destined to mature regardless of coincidence with other maturities, so long as the government competes with business, then, just that long will memory repeat itself."

 

Covered 118 Years

Funk took his figures over a period of 115 years. First, he noted when the first panic was noted. The panics of 1873 and 1920 followed at 56-year intervals. He said that a depression was due in 1913 but was forestalled by the war and the consequent expenditure of moneys by foreign countries for war munitions. "Depressions," Funk said, "are periods of industrial stagnation when surplus productions are used. We may expect the peak of our market prices in October, 1936, the same as the peak was reached in 1897 before the 1903 crash. In 1817, when canal construction was being financed, leaders described the expenditure of money as wild orgies of speculation; again in 1873, when much money was spent in financing the construction of transcontinental railroads, the same expression was used, and in 1929, William Randolph Hearst expressed himself similarly." Funk was accompanied to the meeting by L. C. Carroll, secretary of the Ottawa Chamber of Commerce, who introduced the speaker. His statements produced an unusual effect on the gathering, who came to attend in a doubting frame of mind, but left with entirely different feelings.