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.
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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.
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| 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.
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| 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 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.
"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