Market Cycle Model

The best investments are made when the primary trend is in a rising mode and the intermediate- and short-term market movements are bottoming out.

There are several trends operating in the market at any particular time. They range from intraday, hourly trends right through to very long term or secular trends that evolve over a 20- or 30-year period.

For investment purposes, the most widely recognized trends are short term, intermediate term, and long term. Short term trends are usually monitored with daily prices, intermediate-term trends with weekly prices, and long-term trends with monthly prices.

From an investment point of view, it is important to understand the direction of the main, or primary, trend. This makes it possible to gain some perspective on the current position of the overall cycle. The construction of a long-term Know Sure Thing (KST) is a useful starting point from which to identity major market cycle junctures. The introduction of short and intermediate series as well now enables us to replicate the Market Cycle Model.

The best investments are made when the primary trend is in a rising mode and the intermediate- and short-term market movements are bottoming out. During a primary bear market, the best selling opportunities occur when intermediate- and short-term trends are peaking.

In a sense, any investments made during the early and middle stages of a bull market are bailed out by the fact that the primary trend is rising, whereas investors have to be much more agile during a bear market in order to capitalize on the rising intermediate-term swings.