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In today’s Cashin’s Comments, Art Cashin revisits a popular technical stock market cycle: the 17.6 year cycle.SImply put, the stock market will experience 17.6 years of monster gains followed by 17.6 years of volatility ending with next to no returns.
However, this time around, Cashin offers a more granular look at the cycle that might make you a believer.
From this morning’s Cashin’s Comments:
For this morning, however, I’d like to cite an email I got from Walter Murphy after the dinner. At dinner, I had cited to the group the 17.6 year cycle. As regular readers will recall, it postulates that there are fat and lean cycles not unlike the seven year agricultural cycles in the biblical tale of Joseph and the coat of many colours.
For those of you who may have forgotten, here’s a quick 17.6 cycle review:
The last “fat cycle” ended when the tech bubble topped in about February 2000. Just so it works on your calculator – let’s call that 2000.2. The Dow is around 11500. Subtract 17.6 years and you are in the middle of 1982. The Dow is around 900. It will soon embark on the greatest bull market in history. Subtract another 17.6 years from June of 1982 and you are back to the beginning of 1965. The Dow is around 900. Yes….that’s the same area you will find it in 17 years later. This clearly is the lean cycle. The Dow will go above and below 900 many times. Money will be made and new industries flourish but it will require skill and hard work to find them.
Subtract another 17.6 years from 1965 and you are back around the middle of 1947. The war has ended. Smokestack prosperity is in the offing. The Dow is around 220. This was to be a fat cycle.
Subtract another 17.6 years and you are back in early fall 1929. The Dow is around 380 – but not for long. This…..clearly….. will be a lean cycle.
Based on that we may be in a lean cycle. That’s not a market that’s stagnant for 17.6 years, rather it’s a zigzagging volatile market that re-challenges its highs and lows but makes little long range progress.
Anyway, Murphy, the consummate technician takes this home (along with a small doggy bag) and insists on playing with numbers to see if they contain any other insights. Here’s some of what he sent back:
As for the 17.6 year cycle, most cycles are divisible by a factor of 2. On that premise, I counted 211 months (17.6 * 12 / 2) from the 2000 high and came up with 1/09. Not bad relative to the 3/2009 low.
I then divided 17.6 years by 4 which = 53 months. Counting from the 2009 low. the next inflection point should be 8/2013. Two months later — 10/13 — the post 2009 bull wd be a Fibonacci 55 months old. Can it last that long?
At the expense of reductio ad absurdum (I was an altar boy too), if I divide 17.6 by 8, and count forward from the 2009 low, it hit the 5/2011 high on the head.
I will play with Walt’s subsets on data over the last 70 years, when I get a chance to see what they yield.