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Morning Brief* – May 19, 2014

Morning Market Brief.

Macro economy in terms of business cycle model-

5/18- Unemployment remains in a long-term cyclical downtrend. GDP is likely to rise from spring to summer months. The 3yr and 9yr long-term business cycles offer growth for domestic and global economies this year and for most of 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)–5/18- L2 top as expected week of March 3 and L1 top week of May 2. L2 bottom week of 3/24. Trend is to be down 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)--5/18-L3 bottom April 28 and May 7 or 15th. Trend should be up until week of May 17. Watch response to 40-day average basis SP500. Objective is 1890 to 1900. L1/L2 trend(next 2 months)-5/18- L1 cycle up trend until early June and with potential for 1910 to 1940 for SP500. The a new bull market began from last year relative 3yr cycle and will last until some time 2014. The 9yr business cycle is bullish until 2017 to 2019. 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. I remain bullish India. Eurozone is out of recession and bull market for stocks is underway and will last until late this decade alongside the U.S. Bull market for 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 top week of March 7. L1 cycle top as near non-event week of May 16. L2 cycle low due now, but can allow all of this month for the reversal. Trade over 102.36 a sign a L1 trend is up. L1 type are the most important trends during a year. Range trade with declining volatility. Building potential for a worthy trend. Undervaluation for the dollar compared to yen but not the case for the dollar compared to other currencies.

Gold – L1/L2 trend(next 2 months)--5/18- Still long term bullish but see no reason for a major bull market. Flipping to model script that offers June as an up month. But what of amount of price change. 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)-5/18-May range trade through June, but I am of a somewhat bullish bias. Support of oil over $90 offers support to bullish economy opinion. As does the recent reversal of copper.

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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