Stock Market Highlight #27
Stunning importance of "Inversion Index" and
"Linear Cycle Index" projections to major stock market turns is graphically
presented.
(COMMENT # 748, 750)
UPDATED 19981017
COMMENT 1998-748
1. The chart shows daily cash S&P 500 prices through Friday's close.
2. Sometimes we overlook just how important the "Inversion
Cycles" can be as an aid in identifying market turns.
3. In the S&P 500, recent weekly "Inversion Cycle" turns are shown in the
chart by the four "horizontal brackets".
4. The weekly "Inversion Cycle Index" for the entire year, of course, may be
found on page 297 of "The 1998-99 $upertrader's Book of Linear Time Cycles".
5. It is the dotted line in the chart at the bottom of the page.
6. This index suggests a market turn (or change in trend) ONLY when the dotted line PEAKS
(see pages 20-23).
7. Neither a high or low point is projected, only a turn.
8. Hence, one must identify the existing trend as the turning point projection approaches.
9. In the chart, one can see that trend was obviously up as the July "Inversion
Index" turning point projection approached.
10. The market turn was thus expected to mark a high point and trend was expected to
reverse from up to down.
11. As can be seen, such is exactly what happened at the July market high.
12. The all-time closing high occurred on Friday, 980717, the week of the projected turn.
13. The intraday high occurred the following Monday, 980720.
14. The next 2 projected turns EXACTLY ALIGNED WITH the 980901 low and the 980923/980924
high.
15. The week these turns were projected in the book are marked in the chart by the next
two horizontal brackets.
16. Note that, in a complex, it is important to study the projected information not only
for one market in isolation from all the others, but also the projections for the other
markets in the complex.
17. We don't discuss this concept often because it can be a little confusing for some
market observers and for beginners.
18. As an example, the final horizontal bracket shown in the chart does not mark a weekly
"Inversion Cycle Index" projection for the S&P 500, but does mark such a
projection for the other two indexes analyzed in "The 1998-99 $upertrader's Book of
Linear
Time Cycles".
19. Those two indexes are the NYSE and Value Line indices.
20. It is important to note the interplay between the 3 markets.
21. Here's how this interplay can best be studied when analyzing markets in a complex (a
complex would be such groupings as the energy complex, the bean complex, the meat complex,
the grain complex, and so on - the grain complex further includes the
wheat complex).
22. Simply do the analysis in the weekly pages of the book.
23. As an example, in the equity grouping (stock market complex), we have three markets to
follow, the SP, NY and VL.
24. Turn to page 185 in "The 1998-99 $upertrader's Book of Linear Time Cycles".
25. Do you see the "SP" under the "Inversion Cycles" listing at the
top of the page?
26. See how it's listed under the "WIC"?
27. If we look in the key right below the "WIC", we see that the "WIC"
is presenting the "Weekly Inversion Cycle" projections for that week.
28. We try to make everything simple and intuitive in the book.
29. As an example, look at the very bottom of the page.
30. Here we can quickly orient our information and, with one quick glance, see that the
information presented on this page is for
A. the week ending Friday, September 25, 1998 which is
B. the 39th week of the year.
31. This weekly "Inversion Cycle Index" is, again, marked in the chart by the
bracket above price in late September (the third bracket shown).
32. COMMENT # 701 of 980924 specifically highlighted this very "Inversion Cycle
Index" as one of the key reasons for the short sale recommendations at the time.
33. But note, on page 185 which was the page cited at the time, that only the
"SP" (S&P 500) stock index was listed.
34. What happened to the "NY" and "VL" projections?
35. Turn to page 193 in "The 1998-99 $upertrader's Book of Linear Time Cycles".
36. Let's look at the same "WIC" in the "Inversion Cycle" listing.
37. Note that both the "NY" and "VL" are projected for the week listed
and that the "SP" is notably absent.
38. The "NY" and "VL" listings on page 193 are shown in the above
chart at the 4th horizontal bracket just below price in early October.
39. As can be seen, this bracket marked the week of the 981008 low in price in the stock
market indexes.
40. Another strong indication was the DIVERGENCE which was created by the failure of the
Dow Jones Industrial average to trade below its 980901 intraday low while such indexes as
the S&P 500, NYSE, NASDAQ 100 and so on easily broke these levels (see
pages 171-184 of "The $upertrader's Reference Manual").
41. As we've repeatedly discussed in these COMMENTS over the last three months, the stock
market has been following and has been in ALIGNMENT WITH the monthly "Linear Cycle
Index" for the S&P 500.
42. We've mentioned several times that this monthly "Linear Cycle Index"
projection has been the road map we've been following.
43. It's shown by the solid line in the chart at the bottom of page 295 in "The
1998-99 $upertrader's Book of Linear Time Cycles".
44. The index is also the solid line shown in the preceding S&P 500 chart in this
COMMENT.
45. As you can see, it peaked in July and declined through October (just as in the book on
page 295) and is arbitrarily drawn from the 15th of each month.
46. This is the exact same cyclic trading technique presented on page 29 of "The
1998-99 $upertrader's Book of Linear Time Cycles".
47. The key, of course, to using cyclic projections is the determination that the market
is proceeding in accordance with the cycle projection and expectation.
48. In other words, if a market reversal is expected to form a turning point high in
price, price should be moving UP INTO the expected turning point time period.
49. It's that easy!
50. We've repeatedly reviewed how the "Inversion Cycle Indexes" are about the
most important tool one can use in projecting future market turns.
51. What most people find difficult to comprehend is that the brackets shown in the chart
and which so nicely now ALIGN with price were known last January.
52. You can read "Barron's" and the "Wall Street Journal" and listen
to CNBC all you want, but they can't tell such a story.
53. The reason why is because the "Inversion Cycles" are not man-made, but (I
believe) are of Divine origin (see the title at the page of 22 of "The 1998-99
$upertrader's Book of Linear Time Cycles").
54. It's the reason such widely-followed information as Price to Earnings Ratios, Book
Value, Growth Rates and so on simply cannot compete and, in fact, are not even in the same
league.
55. In my opinion, it helps answer the question of whether one's pursuit of God can create
a better understanding of the markets.
56. CNBC repeatedly is speaking of the shock investors across the nation are experiencing
as they open their mutual fund valuations.
57. They'd likely experience fibrillation, however, were they to see what they've missed
were they to see what some of those who have adhered to these COMMENTS have done over the
last half year or so.
58. And all one needs to do is turn the pages of the books to benefit from this
information!
59. It's been there all along.
60. Now, having taken you on this rather remarkably journey, we're faced with the same
question as always, which is, "What Next?"
61. We'll address this question in a moment, of course, after the next COMMENT.
UPDATED 19981017
COMMENT 1998-750
1. Now let's get to the heart of the stock market discussion - what to expect next.
2. Turn to page 193 in "The 1998-99 $upertrader's Book of Linear Time Cycles".
3. Note the "Cyclic Trends" section.
4. The information on this page is for the week ending Friday, October 9th, the week of
the 981008 low in the stock market indexes.
5. Note all the "B" (for "buy" or enter long a new position) for the
"NY" and "SP".
6. These linear time cycle "buy" signals occurred the week of the low.
7. As previously reviewed, they also occurred during the week of the "NY" and
"VL" weekly "Inversion Cycle Index" signals (see the horizontal
bracket in the preceding S&P 500 chart - the bracket is shown just below the October
low).
8. The weekly "Inversion Cycle Indexes" and weekly "Linear Cycle
Indexes" were thus in ALIGNMENT at the 981008 low.
9. The monthly and weekly "Linear Cycle Indexes" were in ALIGNMENT (see page 21
of "The 1998-99 $upertrader's Book of Linear Time Cycles").
10. When all this information is combined, it's no surprise that the market turned after
its sharp decline.
11. Now let's turn to page 201 in "The 1998-99 $upertrader's Book of Linear Time
Cycles".
12. Do you see the letter below the "SP" in the "Cyclic Trends"
section?
13. Can you look at the information in the "WIC" ("Weekly Inversion
Cycle") projections in the "Inversion Cycles" section?
14. Now let's look at the long term seasonal average in page 276 of "The 1998
$upertrader's Almanac - 2nd Half Edition".
15. Isn't this easy?
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