Saturday, December 10, 2011

12-10 The long term outlook - part II

As I showed you in Part I we have 3 very long cycles (120 year, 60 year, 30 year) that should bottom sometime between the start of 2012 and 2014.  Now FED/other Central Banks/government  intervention could affect the exact timing of this bottoming, but current expectations is it should happen withing the next 2-3 years.

Kress says a cycle gets its hard "mo" down during the last 1/8 (12.5%) of the cycle.  So the last 15 years (1/8 x 120) of the 120 year cycle should be hard down.  That point probably was reached with the market peak in 1999 and would put the bottom in 2014.  The 60 year cycle should be hard down its last 7.5 years.  The 2007 peak probably represents the point at which the the 60 year cycle started its hard push down.  The 30 year cycle should have started its hard push down around May of 2010 near the "flash crash"  and be hard down for 3.75 years.

A cycle we have yet touched on is the 12 year cycle.  There are five 12 year cycles in the Super cycle and 10 in the Grand Super Cycle.  Last bottom was the pullback of 2002 (which implies a bottom in 2014).  It should be hard down its last 1.5 years (1/8 x 12 = 1.5) starting in mid 2012.  So by mid year 2012 we have the 120 year cycle, the 60 year cycle, the 30 year cycle and 12 year cycle in hard "mo" down.  I think it can be concluded this would create the potential for a market that could lose 50% or more of its value over a 2 year period like we saw in 2008-2009 only turbo charged.

Here is how all these cycles and their "hard down" phases line up:

 As you can see - starting by mid 2012 all these cycles are in a hard down phase....

The 12 year cycle is made up of two 6 year cycles.  The second 6 year cycle should be hard down in the final bottoming phase (about the final 9 months).  Droke believes this cycle topped (early) in May of this year (would project a bottom in 2014).

One last cycle to consider is the inventory cycle.  Some call it a 4 year cycle (others call it the Kitchin cycle).  Even though it can vary the average length is around 42 months (3.5 years).   Inventory data suggests  that  inventory got replenished from the 2008-2009 recession (which helped drive the recovery).  Here is the inventory data - see for yourself:

In any case this cycle is now down and should bottom in the 3rd quarter of 2012.  Just as it bottoms the 12 year cycle should enter its hard down phase negating any upside from this cycle in 2012-2013.

Here is how all this fits into the longer term picture:

As I have from time to time discussed the Kitchin cycle and its component Wall cycles in my swing cycles discussion you should now have a complete picture.


  1. Terrific post! By the way I staring reading Hurst as you suggested, absolutely fascinating, my sincerest gratitude.

    Question: it appears your 30 years cycle bottoms in 82 and then bottoms again in 2014, shouldn't it have bottoms in 84 or is this an example of variation in period length?


  2. Tom -

    Good question. As I explained in Part I - FED/government action may delay the bottoming of these cycles. I said "Fed and government policy (see Japan reference above) may have delayed and elongated the the economic cleansing, but it has not stopped it.". Many analysts claim without this interference that we would be bottoming by now (1982+30 = 2012) and not over the next 2 years.

    In other words kicking the can down the road may have an impact, but it does not alter the eventual outcome.