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Morning Brief* – May 12, 2014

Morning Market Brief.

Macro economy in terms of business cycle model-

5/12- Unemployment remains in a long-term downtrend. MBA purchase applications spiked 9% for week of May 2. Winter recess is over for real estate demand. Expect the U.S. Economy to shrug of the sizable negative impact of winter weather. The model continues to offer net growth. The Eurozone is out of recession. China should pickup the pace somewhat during summer months. In general, the global economy should grow for 2014 and will likely persist into 2015. Although a correction can occur during 2015, the larger 9yr long-term business cycle trend is to be up until late this decade.

Markets in terms of business cycle model:


L5-L13 trends durations are hours to fraction of one second.

L4 trend duration is ½ to 2 days. Intra-week trend. A very short term trend.

L3 trend duration is 2 days to 2 weeks. Intra-month trend. A short term trend.

L2 trend duration is 1 to 2 months. Minor intermediate intra-year trend.

L1 trend duration is 1 to 5 months. Major intermediate intra-year trend.

3yr cycle trend duration is 5 to 27 months. Minor long term trend. Intra-decade trend. Can make or break your business and investment year. But can be choppy at times. May relate to famous Kitchin cycle used in business and economic analysis.

9yr cycle trends last a few years to nearly a decade. Major long term cycle. Intra decade to decade. Economy follows this cycle with growth trends of 7 to 12 years and recession trends of 1 to 3 years. This cycle is found in weather/climate, production, consumption, prices. Similar to same cycle as the Juglar cycle used by business and economy analysts.

Super cycles- 27/36, 54/72, and 216 years. Create trends lasting a decade to a century.

See end of document for favorite technical studies.

All trends integrate for the big picture- for a clock like model. Consider people conduct business on a basis of daily, weekly, monthly, quarterly/semi annual. Relative society, monetary, multi-generation, plus business, people create trends on a basis of decade, century, etc. The second hand of a clock times the minute hand that times the hour hand.

Managed Alternative Investment-5/4- My fund, CWL, posted a new record high for March and gave back a little during April. The fund continues to behave like a hedge fund and out performs CTA indexes. CTAs have underperformed as a group for three years. Hedge funds out performed CTAs, but under performed the stock market.

Commodities –(mostly based on DJUBS index)–5/12- L2 top as expected week of 3/3. L1 bottom week of 3/24. Trend is to be down to sideways into L1 bottom due near end of month. Anticipate June to be an upswing month. Long-term 3yr and 9yr cycles bottomed January 2014. (Some indexes bottomed earlier.) The long-term trend is up until late this decade. Commodities were in a bear market from 2011 to 2013 and contrary to the overall economy and the stock market. Commodities have now joined the economy growth cycle. Supply was balanced to what the economy could afford as of 2013.

Stocks – L3 trend(next 5 days)-5/12-L3 bottom 4/28 and 5/7. Trend should be up until 5/16 if not the week of 5/19. Watch response to 40-day average basis SP500. L1/L2 trend(next 2 months)-5/12- L1 cycle up trend until late May to early June and with potential for 1890-1910 for SP500, but keep in mind old target of 1910. Considering chance for less downside potential during June, and considering chance for 2014 to be another bull market year. Watch recent monthly highs of some foreign indexes. For some indexes a violation would be a sign of a 3yr long-term business cycle bottom. Shanghai SE 50 index over 1565.17 a long-term bullish sign. If trade over 15164.39 Nikkei 225 consider the 3yr cycle has returned to bullish. The 9yr business cycle offers a bull market for stocks until near the end of this decade.

Euro Forex –L1/L2 trend(next 2 months)-5/12-L2 top as expected. This type of trend peaked 5/8. Trend is down until sometime June. 1.36?

Yen Forex –L1/L2 trend(next 2 months)-5/12-L2 cycle low due now, but can allow all of this month for the reversal. Trade over 103.02 a sign the trend is up. A rally until mid-June is expected, but what of sluggish trade past 30 days.

Gold – L1/L2 trend(next 2 months)-5/4- Still long term bullish but see no reason for a major bull market. Still seeking L2 up trend for the month of May but last month's low needs to hold as support. Return to 1400 is feasible. Gold will rally this decade to growing economies and desire for portion of total portfolio and not from disasters.

Oil-L1/L2 trend(next 2 months)-5/4-Jul oil declines this month into L1 cycle trend bottom. Still long term bullish but still do not see a major move higher. Range trade with a bullish bias feasible. Adequate supply but global and domestic economies will grow. With recent high a L2 top and higher than a previous more important L1 top, then oil during June to July returns to the L2 top.

Additional model input-

Core model is cyclical price only. Total model research includes conditions from quantitative, fundamental, and economic studies as well as simple observation (discretion opinion), plus cycle model concept applied to a variety of fundamental/economic data including PMI, nominal GDP per capita, various supply/demand data, and climate. The core model and the use of the concept applied to non price data is called Cycle Series Analysis.

Twitter: @cycleszeitgeist YouTube: Richard Posson Stocktwits: cycleszeitgeist rposson

Linkedin: Richard Posson


Alternative investment managed by Richard Posson.

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