| The Decade Bubble Effect - is a consideration
that should be factored into stock index analysis, but
only from a long-term perspective.
In short, the favored investment of
each decade has peaked at the extreme (beginning or
end) of the year and decade (see rules on intra-period
extremes). In the 1970’s the fear was inflation and
the favorite investment became Gold, which topped within
3 weeks of the end of the year and decade - on January
21, 1980.
The 1980’s saw the rise of the Japanese
economy and the belief that the Japanese had the secret
on eternal good fortune and wealth. The Nikkei topped
within 2 days of the end of the year and decade - on
December 29, 1989.
Without a doubt, the favorite investment
of the 1990’s would have to be US stocks and/or mutual
funds. With so many cycles aligning on January 17-20,
2000, I cannot help but feel that a major turn in sentiment
is at hand. If US stocks - or a key indicator like the
Mutual Fund Index - top in January, it will perpetuate
this pattern of intra-period X-X patterns, particularly
with markets resembling a bubble.
Another index to monitor carefully
- in relation to this pattern - is the Nasdaq. Since
it has become as much or more of a bubble than any of
the others, it could be the first to fulfill this potential
with a peak in January (initial resistance is at 3880
- 3910/NDH with second resistance at 4190 - 4225/NDH).
This pattern also fits with the 70-year
cycle described a couple months ago. The last time stocks
were such a favored investment for an entire decade
was in the 1920’s. During that same period, the market
surged the majority of the decade and peaked within
weeks (3% of the overall 10 years) of the end of the
decade.
I mention this unique pattern because
of the significance of the cycles I have aligning in
January, particularly between the 17-19th. One other
cycle that should be watched appears on January 3rd.
This date completes a perfect 84-day/84-day cycle between
the July 19th & October 11th peaks in the S+P.
To show the impact this cycle has had,
we can take it back another 19 months. The July 19th
high was 83 days from the April 27th peak, which was
85 days from the February 1, 1999 high - completing
another perfect 168-day cycle…In short, this 84-day
cycle - representing 7 x 12 or completion x completion
- comes into play on January 3rd, the first day from
the beginning of the decade, and should be watched as
closely as cycles in the middle of the month! January
3-7th is also 70 weeks from the 9/98 DJIA low.
The week of January 3-7th will also
be an exact 19 weeks (Cycle of Time) from the August
24th, 1999 high in the DJIA. I documented this cycle
in 1998 - and used it to forecast a July 19-21st, 1998
peak and subsequent drop into Sept./Oct. 1998 - and
it has continued to influence the stock indices ever
since.
A peak between January 3-7, 2000 would
also be 114 weeks (6 x 19) from the 10/97 low & 76 weeks
(4 x 19) from the 7/98 high. In addition, it would be
57 trading days from the 10/18/99 low, which was an
exact 38 trading days from the 8/24/99 high.
Since the current week (12/27-31/99)
is an exact 180 weeks from the 7/96 low (which was exactly
120 weeks from the low that began this explosive move
in 1994), there is also a strong geometry coming into
play at the end/beginning of the new year. In other
words, it is NOT simply the ‘2000’ euphoria and anxiety
that could plague the market in the days and weeks to
come. |
