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Posson Report

Morning Brief* – July 19, 2014

Macro economy in terms of business cycle model-

7/19-Business statistics still suggest growing domestic and global economies. The PMI as input to a cumulative study was at record high. The study was of positive correlation to nominal GDP per capita since 1950s. The business-cycle model continues to forecast growing economies until late this decade. The smaller of long-term cycles is up into 2015.

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 BCOM index)–7/19- Correct model call for early 2014 rally and a L2 cycle top was placed in late June, which was earlier than expected. A L1 bottom (more important than L2) is due in a few weeks. The long-term 9yr business cycle trend is up until late this decade.

StocksL1/L2 trend(next 2 months)-7/19- L1 cycle top June 9 and related bottom was week of 6/27. A L2 trend is up until mid- to late August. The L1 trend may be up until October to November. A long-term 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)-7/19-A long-term 3yr cycle low is due and the Euro should rally into 2015 for a similar peak. The recent decline was larger than expected. A return to 1.37 should increase odds for a rally to near 1.40.

Yen Forex –L1/L2 trend(next 2 months)-7/19-The trend has stalled more than expected, but the best model forecast is for a rally into 2015. A violation of a monthly high on a monthly close would be evidence.

Gold – L1/L2 trend(next 2 months)-7/19- The trend turned up with trade over $1294. Still long-term bullish, but still do not see reason for a significant move higher. $1500 later this decade likely.

Oil-L1/L2 trend(next 2 months)-7/19- Slow grind higher into next year. Look at a monthly continuous chart.

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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