Morning Brief* – June 26, 2014
Macro economy in terms of business cycle model-
6/26-First quarter GDP was old news. Lower Durable Goods Orders Report was intra-year fluctuation. Consumer confidence, home sales, manufacturing and services reports this week suggested an upswing for the U.S. Economy. And so no change to the long-term business cycle outlook for a growing economy 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.
Commodities –(mostly based on DJUBS index)–6/26- Correct model call for current rally and a L2 cycle top is due during July. The long-term business cycle trend is up until late this decade.
Stocks – L3 trend(next 5 days)-6/26-L3 short-term top June 24. Related bottom is due now to start of next week. I favor this week. L1/L2 trend(next 2 months) L1 cycle top June 9 and related bottom is due now to early next week with this week favored, but the previous forecast calling for the bottom as of June 11 might have occurred June 12. A L2 trend is up until early August. The L1 trend may be up until September to November. I think 2,000 SP 500 is feasible this year. A bull market began in February, a revision from last year and relative the 3yr cycle and will last until some time 2015. The 9yr business cycle is bullish until 2017 to 2019. Shanghai SE 50 index over 1565.17 a long-term bullish sign. Trade over 15164.39 Nikkei 225 was a sign the 3yr cycle has returned to bullish. The global stock market is likely to rally into next year.
Euro Forex –L1/L2 trend(next 2 months)-6/26-L2 top May 8 was as expected. Trend was down as expected with minimum objective of 1.36. A L1 cycle low was placed week of June 20. Trend is up into a L2 top due some time July. Recovery to 1.3733? Best guess is the 3yr cycle has not yet peaked and so the L1 cycle (larger than L2) may be up until fall months. But if the ECB prints money this summer then a bearish stance likely.
Yen Forex –L1/L2 trend(next 2 months)-6/16-L1 bottom that occurs two to three times per year was placed May 21. A long-term 3yr cycle bottom should have occurred as well. A L1 uptrend offers strength for the dollar side for first half summer, while the long-term trend (3 year cycle) offers strength for this year if not until early next.
Gold – L1/L2 trend(next 2 months)-5/28- The trend is down unless trade over $1294. Still long-term bullish but still do not see reason for a significant move higher.
Oil-L1/L2 trend(next 2 months)-6/26- L1 top in August 2013, December 2013 and May 2014. L1 bottoms were during January and June. Spot crude backs up to test recent violation of L1 top. Likely building bullish potential, but I am not expecting a major move higher. L2 trend should be up until late July to early August. L1 trend should be up until September to November. The long-term 3yr cycle trend is likely up into next year.
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.
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