Foundation for the Study of Cycles, Author at The Foundation for the Study of Cycles

By Bill Sarubbi, FSC Board Member

The S&P and NASDAQ indices, both weighted and unweighted, have broken out of consolidations. The cycles for both indices point up, so higher quotes are likely. The prior resistance is now support, and price is sitting just above these support areas. This establishes an attractive reward/risk ratio in each market. Newsletter writers have gone from bullish to very bearish quickly. And now the AAII survey has more bears than any time in the last year.

In the summer of 2024, I noted that the stock market was likely to move higher. However, the big tech leaders were seen to be too extended and due for a correction. If the market was to move higher and the tech leaders were to correct, then other stocks would have to start outperforming, which has been the case. Let us analyze the prospects for these stocks through the use of cycles.

The relative strength of the equally weighted NASDAQ versus the S&P 500 turned up in late December and remains strong. This indicates that the average stock in the NDX 100 is stronger than the cap-weighted S&P 500. The big-cap tech stocks have been lagging while the smaller weights in the index have been rising. The result: Many more stocks are rising, but the equities that have the greatest influence on the indices have lagged. This is in sharp contrast to the situation in 2024 in which only 25% of the stocks outperformed the S&P 500.

The relative strength screen shows that within the NASDAQ 100, the big 8 tech stocks are ranked from number 6 (Netflix) to number 75 (Microsoft). Here are the stocks in relative strength order with the cycles' recommendations in parentheses:

Netflix (hold)
Meta Platforms (sell)
Tesla (buy)
NVIDIA (sell)
Amazon (sell)
Apple (hold)
Google (sell)
Microsoft (cycle low in March)

This monthly cycle explains the buy signal on Tesla:

Tesla Monthly Cycle

Here is another picture that explains the sell opinion on NVIDIA:

NVIDIA Monthly Cycle

The top 5 NASDAQ current relative performers are:

Palantir
Super Micro Computer
Axon
Atlassian
DoorDash

From these new leaders, here are the stocks that can be added to portfolios now.

Super Micro came down hard, bottomed, and is now giving longer-term buy signals, supported by rising cycles.

Super Micro Daily, Weekly, and Monthly

Atlassian features technical strength and a rising monthly cycle.

Atlassian Monthly Cycle

Bill Sarubbi Bio
cyclesresearch.com

Bill Sarubbi obtained his BS in 1971 and his MBA in 1972 from NYU, becoming a member of the Foundation for the Study of Cycles in the same year. He trained as a therapist under the direction of Dr. John Pierrakos in New York for nine years. From 1972 to 1990 he worked on the buy and sell sides of Wall Street as an analyst with the Value Line Investment Survey, as an institutional broker, and as a technical strategist with PaineWebber. From 1990 to 2004 Sarubbi was with the Abu Dhabi Investment Authority, where he was a technology fund manager, North American strategist, and member of the currency hedging committee. Since 2004 he has been operating his own money management and consulting service. In the course of his work, he developed unique market analysis software. Sarubbi is a Forbes contributor and is active in groups that focus on the future and on cycles, including the Kenos Circle, a Vienna-based group of futurists. Sarubbi is based in Vienna.

NOTE: This article is intended exclusively to provide information and education to help individuals better understand cycles and the markets. However, this information is not to be construed as professional advice as to the buying and selling of securities or other investment instruments. In no event does the host express any opinion with respect to, or make recommendations regarding, the purchase or sale of any particular security or other investment instrument. There is a very high degree of risk involved in trading securities, and buying or selling decisions are solely within the personal discretion of each individual.

By Edward R. Dewey
FSC Founder

From the Archives: This article is reposted as it was published in 1970 in the Journal of Interdisciplinary Cycle Research - Volume 1.

Probably more than a thousand scientists, the world over, have studied rhythmic behaviour of one sort or another. They have reported over 500 different sorts of phenomena which have been alleged to fluctuate rhythmically, i.e., in cycles or waves of reasonable regularity. Rhythmic cycles characterize the abundance of animals, the variations of weather, the recurrence of diseases and epidemics, the repetition of basic physiological phenomena, the ups and downs of business, the widths of tree rings, the fluctuations of lake levels, the thickness of sedimentary rock deposits, the outbreak of volcanic eruptions, the occurrence of earthquakes, the number of sunspots, etc., almost endlessly.

The problems of rhythmic behaviour in all these various and unrelated phenomena have, however, one thing in common: The techniques of time series analysis should be largely the same, regardless of the nature of the phenomena being studied. A 9.6-year cycle in wolf abundance in Canada should be studied, statistically, in much the same way as a 9.6-year cycle in the run-off of a river in India.

Moreover, all the various cycles that have been found have one thing in common: When they are statistically significant, i.e., when they have repeated with enough dominance and enough regularity and enough times so that they cannot reasonably be the result of chance, they help us to throw light on the future. They do this whether our interest is in international conflict, immigration, earthquakes, solar radiation, meteorological, economic, biological or medical cycles. However, these two points of similarity in TECHNIQUE and USE are not, by themselves sufficient reason to propagate interdisciplinary cycle research.

When comparative studies are made of the cycles alleged to be present in various scientific fields, it is found that the periods are often the same. This is true not only for phenomena in the same discipline, but for completely unrelated phenomena. Of course, in many instances similarity in cycle periods may occur by sheer coincidence. However, there seems to be a non-chance distribution of the observed periods, i.e., many examples of certain periods are found but few or no examples of other periods. Moreover, cycles with the same period tend to have a turning point at the same calendar time regardless of phenomena or discipline. At this point, cycles become a matter of interdisciplinary concern.

Naturally, some of the cycles that have been alleged are merely accidental regularities of random fluctuations. On the other hand, there are reasons for thinking that many of the cycles are meaningful. For instance, many cycles have high statistical significance; they continue over many repetitions and continue over long spans of time unchanged, despite changed environmental conditions; cycles often dominate the behaviour of animals and man; they often show evidence of geographical patterns, i.e., cycles of the same period, regardless of phenomena, seem to come later and later as found from pole to equator; after distortion, cycles revert to the predistortion phase.

It is often assumed that many of the biological cycles have an endogenous origin. Such endogenous cycles can have high statistical significance, can repeat many times with great regularity, can be dominant, and, by shear coincidence, could have more or less the same period.

On the other hand, it would be extraordinary difficult for cycles of the same period in completely unrelated phenomena to turn at approximately the same time and to have geographical latitude patterns, unless the cause of the regularity were external to the phenomena involved.

The suggestion is thus inescapable that there may be hitherto unsuspected environmental forces which affect terrestrial affairs and determine the time of the ups and downs of many phenomena of interest and concern to mankind. Studies in recent years suggesting very long-term rhythmic fluctuations in a number of biological, medical, and inorganic phenomena strongly support this assumption. Under these circumstances the subject of comparative cycle study would thus seem to be a must for further investigation.

Some people will be interested to explore these possibilities. However, more scientists will prefer to confine their studies to cycles in their own disciplines. People with the latter interest can be most helpful to the major field of interdisciplinary study if they will determine the period of the cycles they study with the greatest possible accuracy; determine, in each instance, its statistical significance; record the latitude and longitude of the phenomenon evidencing the cycle; supply the data; explain the methodology in full; idealize the cycle, and, as important as anything, record the timing of the idealized cycle. Such studies are the bricks of which the larger structure is created.

No one can say whether or not the bricks are more important than the building. We need both. One must work in the area of one's interest. However, if it should be true that there are environmental forces that cause, or at least trigger and/or time the ups and downs of all aspects of human life, it becomes a matter of profound practical and philosophical importance and a challenge for every scientist interested in the broader aspects of the problems of the living world.

by Jake Bernstein, FSC Board Member

rulesbasedtrader@gmail.com

Cycles in economic data are not perfect or symmetrical. I use other tools to confirm cyclical turns. We also know that, given the rules of effective and consistent risk management, cyclical market behavior can and should occupy a key role in the management and/or trading of financial assets.

To use cycles effectively you need a trigger to confirm a top or bottom. Most often these are referred to as timing indicators. Shown below (Figure 1) is the chart I showed in a past article. It indicates my expectation of a cyclical low. Figure 2 (below) shows the current chart along with one of my timing indicators.)

Approximate 8.17 year cycle in Japanese yen futures versus U.S. dollar

Fig. 1: Approximate 8.17-year cycle in Japanese yen futures versus U.S. dollar

Status

My long-term forecast in the Japanese yen versus U.S. dollar index futures is currently of continued interest, not only pragmatically but intellectually as well. Figure 1 is the approximate 8- to 9-year (average 8.17-year) cyclical pattern in Japanese yen futures versus U.S. dollar, as it was when I first wrote about it in July. Although not perfect and not fully symmetrical, the cycle does “pick” the major up and down moves. The projection is shown at the right.

Do note that the cycle was obtained by visual examination of the available data; it has not been “discovered” through the application of any cycle finder program. Yes, the data history is limited but the cycle accuracy is impressive. (Note also that this analysis is not a buy or sell recommendation.)

What the Cycle Says Now

The cycle now suggests that a low is possible at any time. As soon as my timing indicators in this market turn bullish, I will be on board for what should be a major move up in yen vs. dollar Forex and futures. If the cycle holds true, the next few years should prove to be very bullish for yen/dollar. And now it becomes a game of patience!

It's important to note that while historical patterns can provide some guidance, they are not guaranteed to repeat exactly. Market conditions and external factors can always introduce variability.

Figure 2: Cycle low developing

(Charts courtesy tradenavigator.com)

About Jake Bernstein, FSC Board Member

Jake Bernstein has been publishing Jake Bernstein's Weekly Futures Trading Letter since 1972 and trading futures and stocks since 1968. His forecasts and opinions are quoted regularly in the financial press and on financial websites, and he is frequently interviewed on radio and television throughout the U.S. and Canada, including Wall Street Week, CNBC, JagFN.TV, and WebTV.com. In addition to speaking extensively in the U.S., Canada, Europe, and Asia, Bernstein is a consultant for investors, traders, industry, financial institutions, brokerage firms, and commercial firms. Floor traders, professional traders, money managers, and hedgers, both new and experienced, subscribe to his market advisory services. Bernstein is based in California, U.S.

by Jake Bernstein, FSC Board Member

rulesbasedtrader@gmail.com

Written: 26 August 2024

My last article in the FSC newsletter (July 25, 2024) discussed and illustrated my long-term cycle in the yen/U.S. dollar relationship. I showed the approximate 8.17-cycle (Figure 1 below) and stated that the cycle was bottoming.

My intent was to highlight a market that was, in my view, positioned for a major price move against the U.S. dollar and other currencies. Because we know that cycles in economic data are not perfect or symmetrical, we use other tools to confirm cyclical turns.

We also know that, given the rules of effective and consistent risk management, cyclical market behavior can and should occupy a key role in the management and/or trading of financial assets. This brief but well-illustrated follow-up shows what has transpired since my last article.

Long-Term Cycles Forecast: Yen/Dollar

My long-term forecast in the Japanese yen versus U.S. dollar futures is currently of particular interest, not only pragmatically but academically. Shown below is the approximate 8- to 9-year cyclical pattern (average 8.17-year) in Japanese yen futures versus U.S. dollar exactly as it was shown in the last report.

Although not perfect and not fully symmetrical, the cycle does “pick” the major up and down oscillations. The trend projection is shown on the right. Note that the cycle was obtained by visual examination of the available data; it has not been discovered through the application of any cycle finder program. Yes, the data history is limited, but the cycle accuracy is impressive. (Note, this analysis is not a buy or sell recommendation).

What the Cycle Says Right Now When Combined With Timing

The cycle as discussed in my last article suggested that a low was possible at any time. In my work, I combine timing with cycles to compensate for the inherent imperfection of cycles.

Therefore, as soon as my timing indicators in this market turned positive, I was confident that a major move up in yen vs. dollar forex and futures had started. If the cycle holds true, the next few years should prove to be very bullish for the yen/dollar.

Figure 1: Approximate 8.17-year cycle in Japanese yen futures versus U.S. dollar index futures

Approximate 8.17-year cycle in Japanese yen futures versus U.S. dollar index futures (Chart courtesy tradenavigator.com)

(Chart courtesy tradenavigator.com)

Figure 2: A closer look at the approximate 8.17-year cycle in Japanese yen futures versus U.S. dollar index futures

A closer look at the approximate 8.17-year cycle in Japanese yen futures versus U.S. dollar index futures (Chart courtesy tradenavigator.com)

(Chart courtesy tradenavigator.com)

Figure 3: What has happened since my forecast

What has happened since my forecast (chart courtesy tradenavigator.com)

(Chart courtesy tradenavigator.com)

It's important to note that while historical patterns can provide some guidance, they are not guaranteed to repeat exactly. Market conditions and external factors can always introduce variability, which is why I use timing indicators to confirm timing. Shown below is the expansion/contraction indicator that triggered a cycle low (expansioncontraction.com).

Figure 4: Expansion/contraction indicator with yen ETF

Expansion/contraction indicator with Yen ETF (Chart courtesy wealthcharts.com)

(Chart courtesy wealthcharts.com)

About Jake Bernstein, FSC Board Member

by Jake Bernstein, FSC Board Member

rulesbasedtrader@gmail.com

In my fledgling days as an investor in the late 1960s, I discovered the magic of cycles and other cyclical patterns in the stock and futures markets. The beauty of repetitive price and time inspired wonder as well as challenge. The deeper I looked at cycles in the capital markets, the more convinced I became of their value, not only as a forecasting tool but as a means of more effectively managing economies, investments, trading, and commodity production. The field of cyclical analysis writ large, has fueled literally hundreds of books and thousands of research studies. For this, we can thank Edward R. Dewey, the father of cyclical analysis.

My intent in this brief report is to highlight a market that is, in my view, positioned for a major price move. Because we know that cycles in economic data are not perfect or symmetrical, we use other tools to confirm cyclical turns. We also know that, given the rules of effective and consistent risk management, cyclical market behavior can and should occupy a key role in the management and/or trading of financial assets.

Long-Term versus Short-Term Cycles

I am neither a mathematician nor an economist. I am, however, a pragmatist. I do not spend my time pondering the ontology of cycles; rather I prefer to use them as tools for predicting and investing in large, and often long-term market trends. The 17- to 18-year cycle in real estate, for example, has allowed me to be profitable in every real estate transaction I have ever done. Furthermore, the longer-term cycles such as the 10-year cycle (per Schumpeter) and the three- to four-year business cycles have also facilitated my ability to successfully forecast price trends.

The Here and Now

My long-term forecast in the Japanese yen versus U.S. dollar futures is currently of particular interest, not only pragmatically but intellectually. Shown below is the approximate eight- to nine-year (average 8.17 year) cyclical pattern in Japanese yen futures versus U.S. dollar. Although not perfect and not fully symmetrical, the cycle does pick the major up and down moves. The projection is shown at the right. Do note that the cycle was obtained by visual examination of the available data; it has not been discovered through the application of any cycle finder program. Yes, the data history is limited but the cycle accuracy is impressive. (Note also that this analysis is not a buy or sell recommendation.)

CHART: Approximate 8.17-year cycle in Japanese yen futures versus U.S. dollar

Japanese Yen (Elec) Cont Liq @ CME (Quarterly Bars)

(Chart courtesy of tradenavigator.com)

What the Cycle Says Right Now

The cycle now suggests that a low is possible at any time. I combine timing with cycles to compensate for the inherent imperfection of cycles. Therefore, as soon as my timing indicators in this market turn bullish, I will be on board for what should be a major move up in yen vs. dollar forex and futures. If the cycle holds true, the next few years should prove to be very bullish for yen/dollar.

Reasons

For me, no fundamental justifications are necessary. Typically, these justifications or explanations come after a turn has been made. Those looking for reasons why might want to consider the following factors, which could confirm the cyclical expectations.

As stated and illustrated above, the JPY/USD exchange rate has exhibited cyclical patterns, often with cycles of approximately seven to eight years. These cycles can be influenced by numerous factors such as interest rate differentials, economic growth rates, trade balances, and geopolitical stability.

For 2023, if we consider the historical cyclical pattern, we might expect a low now in the JPY/USD exchange rate. This could be influenced by factors such as:

Interest Rate Policies: If the Bank of Japan maintains low interest rates while the U.S. Federal Reserve raises rates, it could put downward pressure on the yen.
Economic Conditions: Japan's economic performance relative to the U.S. could also play a role. If Japan's economy underperforms, it could lead to a weaker yen.
Geopolitical Factors: Any geopolitical tensions or uncertainties could impact the yen's value as a safe-haven currency. I will issue an update, as necessary.

It's important to note that, while historical patterns can provide some guidance, they are not guaranteed to repeat exactly. Market conditions and external factors can always introduce variability.

About Jake Bernstein, FSC Board Member

FSC Board Member Bill Sarubbi was the special guest presenter at the July 16, 2024, Masters Working Group (MWG) interactive session. This summary of his presentation is a sample of the content and high level of discussions happening at the interactive sessions twice a month. MWG is FSC's most exclusive Membership tier and is made up of a small group (less than 50) elite investors, traders, and cycles practitioners. We are currently accepting applications for ten new members of the MWG. If you’re interested in finding out more, book a call with D.R. Barton, FSC's Market Strategy Director [LINK].

Introduction

Bill Sarubbi has extensive experience in the markets since 1966. A trained therapist, he worked as a buy- and sell-side analyst and has been a Member of the FSC for 42 years.
Current Market View: Sarubbi believes there is too much money in the world, evidenced by high-value sales in collectibles (i.e., Sex Pistols single selling for £24,000). This is causing a bull market for almost all assets

Market Overview

General Outlook: Correction expected in tech and communication services sectors
- Broader Market: Overall bull into 2025
Trends: Positive outlook for next year due to historical patterns in years ending in five and post-election years
Short-Term Sentiment: Current optimism is too high, indicating a potential short-term correction

Indicators and Sentiment

Put/Call Ratio: High open interest put/call ratio suggests excessive bullishness
Investors Intelligence Weekly Sentiment Survey: Bullish sentiment above 63%, historically leading to below-average returns.

Market Rotation

Sector Rotation: Money flowing out of tech and communication services into lagging sectors (good thing that supports the bull market)
Breadth Indicators: Broad market indices like the NYSE composite and Russell 2000 showing strength despite declines in tech-heavy indices

Technical Analysis

Key Indices: S&P 500 and Nasdaq expected to head higher after recent pullback has cleared
Cycle Patterns:
- Emphasis on long-term cycles, such as the decennial pattern, supporting continued market strength
- 1-4-10 cycle shows bottoming of this pullback (chart)

1-4-10-Year Cycles 2024

- Better seen in the bottom of graph 1-4-10 Year Cycle 2024 (blue line), which is a composite of the 1-4-10 year cycles (arrow shows the current decline, which typically lasts into the end of July):

Monthly S&P Cycles in Q3 2024

Suggested Trades and Positions

Current Holdings:
- Long Positions: Apple, Qualcomm, Tesla, Netflix
- New Additions: Ryder, Google, Goldman Sachs, Oracle, HPQ
- Short Positions: Autodesk, Walgreens Boots, Ford, Uber
Trade Ideas:
- J.B. Hunt Transportation Services: Positive earnings surprise expected (short-term only)
- Grindr: Strong performance and favorable cycle indicators
- Costco: Reducing position due to expected lag in performance
- Corning (GLW): Anticipated underperformance

Bonds and Notes

Ten-Year Notes: Favorable seasonal period from June to August, holding a double long position
Gold: Expected to stay in a range, with a positive bias until mid-August
Oil: Buying double long oil ETFs based on projected turning points

Gold Analysis

Technical Formation: Gold broke out of a rectangle formation, projected to rise
Seasonality: Positive outlook from July to October
Cycles: Weekly cycle suggesting a buy signal soon

Additional Insights

Market Resilience: Belief in the market's ability to stay resilient due to high liquidity
Historical Comparisons: Past market cycles and how they inform current strategies
Sentiment: Watching sentiment indicators closely for market timing

Q&A

Dollar and Gold Relationship: Generally inverse, but both can rise together in certain periods
Earnings Surprise Method: Leveraging earnings season volatility for trades, with a success rate of 65-70%
Long-Term Cycles: Importance and influence of long-term cycles on market trends

This is the first chapter of the newly republished Cycles: The Mysterious Forces That Trigger Events by FSC Founder Edward R. Dewey. Purchase your copy today!

Chapter 1: The Mystery – and the Stage

“By the Law of Periodical Repetition, everything which has happened once must happen again and again and again – and not capriciously, but at regular periods, and each thing in its own period, not another’s, and each obeying its own law... the same Nature which delights in periodical repetition in the skies is the Nature which orders the affairs of the earth. Let us not underrate the value of that hint.”
–Mark Twain

For over a million years man has been trying to predict his future.

He has always failed – and his failures are buried in the dust of history. Legendary fortune tellers, prophets, oracles, medicine men, astrologers, numerologists, mystics, charlatans, and seers, all claimed possession of supernatural and occult powers that enabled them to see into the future. Wars were fought, kingdoms fell, and civilizations were altered as a result of their pronouncements and predictions.

We are not without their counterparts today. They invade our homes through the media of television, radio, and the press, claiming hidden and mysterious powers that enable them to solve murders, foretell earthquakes, and blueprint our days in advance. They play on latent superstitions within all of us, piously predicting the next political assassination, the next airline tragedy, the next Hollywood divorce.

But, working quietly behind the scenes, thousands of scientists in fields as unrelated as history, botany, anthropology, mammalogy, terrestrial magnetism, sociology, and economics – to name only a few – are accumulating facts and figures that promise to make this age-old dream of foretelling the future at least a partial reality. A new science which deals with the behavior of events recurring at reasonably regular intervals throughout the universe may ultimately enable us to predict, scientifically and accurately, the events of tomorrow.

The consequences and responsibilities represented by this embryonic science are almost too staggering to comprehend. Try to imagine a world where we will know, in advance, the probabilities of when the next war will begin, when the next civil unrest will erupt into a riot, when the next panic will descend on the stock market, when the next flu epidemic will strike, and when the next great flood or earthquake will occur.

And what of lesser events? How would the Parisian salons operate if all of us could forecast what the fashions for milady will be next year? How would Detroit’s automakers react if they could accurately forecast that our choice in automobile colors for the next model year will lean toward a variety of blues instead of this year’s popular greens? Would moviemakers abandon pornography and turn to musical comedies if it could be predicted that the latter will be our preference eighteen months hence?

We are just beginning to probe one of nature’s basic secrets – rhythmic repetitions of events. And when we unlock the last door to our quest we will have the answer to what may well be the greatest mystery in the world – cycles, and their cause.

WHAT IS A CYCLE?

Place your hand on the left side of your chest.
Feel your heart beat? You are feeling a rhythmic cycle – something that occurs again and again at a more or less uniform time interval, a rhythm.

Our world contains hundreds of similar cycles, occurrences that repeat with predictable regularity. Tides ebb and flow every 121⁄2 hours. There is the twenty-four-hour alternation of day and night. The moon reappears every twenty-five hours. Woman experiences a twenty-eight-day menstrual cycle. The seasons come and go on schedule. All these cycles, and countless more, are understandable and explainable. There is no mystery.

But there are thousands of rhythmic cycles in our world for which there is no logical explanation, no known cause. At present we know little more about cycles than was known about chemistry in the days of Boyle, Cavendish, Priestley, and Lavoisier, the fathers of modern chemistry, who made their pioneering discoveries only a brief 175 years ago. We know little more about cycles than was known about germs before Antonie van Leeuwenhoek, in 1675, looked through his famous microscope at a drop of rainwater and saw his first microbe. Until that marvelous day no living man had seen these little wriggling creatures. No man knew that there was a whole subvisible world existing under his very fingernails!

There is much in common between the new world discovered by Leeuwenhoek and the new world discovered by early cycle pioneers. In 1838, Dr. Hyde Clarke, of England, was the first to notice rhythmic ups and downs (cycles) in business activity; Ernest Thompson Seton, the American naturalist, was one of the first to call the public’s attention to the rhythmic variation in the population of animals; and Samuel Benner, in 1875, was the first
American to recognize rhythmic cycles in prices.

These men, and many others, noticed regularities caused by something, they knew not what. But they glimpsed a hint of forces abroad in the universe – forces surrounding us and influencing us – that had hitherto been as unknown as Leeuwenhoek’s bacteria. Their discoveries opened up a whole new world in which to adventure. When these forces and their laws have been removed from the realm of the unknown it should be possible to throw light on the coming of epidemics, on future weather conditions, on the future abundance of wildlife, and on hundreds of other natural mysteries.

But far more important, if these unknown forces affect the behavior of human beings as they seem to, we find ourselves at the very core of the problem of wars and depressions. For if wars and depressions are not caused by generals, businessmen, or politicians, as the mass of the people believe, but are the results of – or at least are triggered by – natural physical forces in our environment, we are on the threshold of a completely different and extraordinary way of life for all mankind.

THE WORLD OF CYCLES

The science of cycles deals with events that recur with reasonable regularity. Such events may be in nature, business, or anything else. The important thing about regularity is that it implies predictability. And if you know an event is coming, you can often prevent it or avoid it if you wish. Or if you cannot prevent or avoid it, you can at least prepare for it so that its effect on your life is lessened.

Most people do not realize the extent to which cycles and regularities exist in the world. Here are only a few examples:

Atlantic salmon vary in abundance in a cycle that averages 9.6 years from peak to peak. Starting with the year with the heaviest salmon population, the fishing gradually gets worse and worse for four or five years. Then the fish start to increase in numbers. Fishing improves each year for four to five years, so that eight to ten years from your starting point the fishing is excellent again. These years of good fishing have come at intervals averaging 9.6 years apart for as far back as there are records.

In Illinois chinch bugs vary in population in a cycle that averages 9.6 years.

The abundance of snowshoe rabbits in Canada varies in a cycle of the same 9.6 years. So does the population of lynx, marten, fishers, owls, and hawks.

Heart disease in the northeastern United States has been found to fluctuate in a cycle of the same duration. The acreage of wheat harvested in the United States varies according to the same cycle.

After this, it would probably not surprise you to learn that grasshopper outbreaks and mouse plagues come in cycles that have a duration of 9.6 years. But they don’t. Grasshopper plagues come 9.2 years apart. Mouse plagues come four years apart – in Presidential election years. Why?

Pine cones are more plentiful in cycles. People join churches in cycles. Prices of every commodity so far studied rise and fall in cycles. Women are more amorous in cycles. Sunspots erupt in greater numbers in cycles. Poets are more creative in cycles. The weather fluctuates in cycles, and so do the fashions in clothes. Why?

The consumption of cheese fluctuates in cycles. The number of international battles fluctuates in cycles. The number of earthquakes fluctuates in cycles. Real estate activities fluctuate in cycles, as do the prices of common stocks. Why?

Male emotions fluctuate in cycles, as do industrial accidents. The sales of every company so far studied fluctuate in cycles, as does the incidence of many diseases. Why?

Cancer recurs in cycles, glaciers melt in cycles, and the levels of lakes and rivers rise and fall in cycles. Advertising effectiveness fluctuates in cycles, as do human intellectual activity and the cattle population. Even political landslides and the number of infants born per day fluctuate in cycles. Why?

In many instances the regular rhythm is undoubtedly the result of chance. But are all these cycles, some of them recurring time after time for hundreds of years, merely chance phenomena? Can we arbitrarily blame them all on chance when we discover that many of them, in phenomena completely unrelated to each other, have their highs and lows at the same time – as if their rhythms were all being controlled by a single gigantic metronome?

SOMEWHERE OUT THERE

Many cycles in nature seem to have the same wavelength as cycles in human affairs, and some cycles found on earth seem to have the same wavelength as cycles found on the sun. The other planets may even be involved, and the implications are strong that the solution to the mystery of the cause of cycles will be discovered somewhere in the universe – “somewhere out there.”

The dimensions of the stage on which this search will take place are awesome. Stand anywhere on the earth and you will be able to see approximately 2,500 stars on a clear night. Imagine for a moment that each star, actually a flaming ball like our sun, has been transformed into a grain of rice. If this were so, you could hold all 2,500 visible stars in a single hand.

But there are over 100 billion stars in our galaxy alone – and if every star were only a grain of rice you would need more than forty railroad cars to hold them all! And our galaxy is only one of 100 million galaxies, each rotating slowly in a cycle of its own, each following its own path in the universe.

Just as grains of rice help us to visualize the star population, let us borrow a few fruits and vegetables to reduce heavenly distances to a scale we can understand. We will begin with one large pea, a quarter-inch in diameter, as our earth. A small seed, one quarter as big, placed only nine inches away, is our moon. Using this scale of dimensions, our sun would be a giant melon, about thirty inches in diameter, almost the length of a football field away. Mercury and Venus would be peas spinning around the sun between the sun and earth. Now 423 feet from our sun let us place another pea, Mars. Then we walk a quarter of a mile and drop an orange, Jupiter. We travel another quarter of a mile and place down another orange, Saturn. A mile from our sun we drop a plum, Uranus; Neptune, another plum, is dropped at a mile and a half; Pluto, a pea, at two miles.

Merely to lay out our own solar system (remember, the size of our earth on this scale is a pea) would require a field four miles square. Then, of course, to make things complete you would have to add dust to represent the 1,500 asteroids, the comets (more than a thousand of them), and various moons, each with their cycles of rotation and revolution.

Now the true immensity of our task is upon us, for in order to position accurately the nearest star to earth we must leave our four-mile-square field and travel 14,000 miles! To continue until we have covered only the stars in our own galaxy on the same scale we must travel 31⁄2 times the real distance to our sun!

And yet evidence is mounting that there is “something out there” – some force, or forces, that affect every living thing on earth, and it does so with rhythms that have taken man through cycles of war and peace, prosperity and depression, optimism and despair, discovery and isolation, morality and degradation, creativity and ignorance, famine and plenty.

TIME: THE YARDSTICK

While you are still trying to relate the size of your own neighborhood to the vastness of space, let us consider time and age.

In all cases we measure the recurrence of cycles by time – fractions of a second, seconds, minutes, hours, days, weeks, months, years, centuries, millenniums.

Some electromagnetic waves have cycles so swift that they are measured in billionths of a second. The sun, on the other hand, makes its circuit of our galaxy in a cycle of 230 million years.

At the turn of the century many people actually believed that the world was created in 4004 b.c. Today the generally accepted age of our universe is approximately 15 billion years. Our earth, however, is a youngster, only about 5 billion years old.

Do you know how long 5 billion years is?

Let’s try to comprehend this planet’s age through another simple scale with proportions we can all understand. An effective method that I used years ago when teaching was to load my students in my car and say, “Now we are going to take a twenty mile drive to such-and-such a monument. We will let this twenty-miles represent the time from the creation of the earth to the present.

As we go along I will point out when various things happened – such as the solidifying of the earth’s crust, the beginning of life, the emergence of the earliest mammals, the appearance of the earliest men, the beginning of recorded history, when the United States was born, etc.”

On our scale of twenty miles to 5 billion years it was quite surprising to the students how many miles we had to drive before we came to the first life on earth – some sixteen miles, if I remember correctly. Man, however, did not appear until forty feet from the end of our journey. Recorded history began only one inch prior to “now”; and the United States appeared only in the last 1/20th of an inch!

Peas, plums, oranges, rice, melons – and a twenty-mile ride in the country. Did they help you, in some small way, to comprehend the grandeur of That Which created and sustains the universe – call it God or Nature or whatever you prefer?

MAN’S GREAT MENTAL CHANGE

What you have been able to grasp in the last few moments required thousands of years for our predecessors to understand. Revising our estimate of the time of the earth’s creation from 6,000 years ago to 5 billion years ago – from 11⁄2 inches to twenty miles – is perhaps the greatest revision in knowledge in human history.

This mental change also applies to our concepts of mass and space. Three hundred years ago people thought that our little planet was the whole universe except for a couple of lanterns hung in the sky by God to give us light by day and by night, and a handful of fireflies scattered up there for no particular reason. Since then man’s “universe” has changed, first from the conception of our planet to our solar system, then from our solar system to our galaxy, then from our galaxy to the entire universe.

The widening of our mental horizons has been accompanied by revolutionary changes in knowledge and technology that are even more startling. Twenty-five years ago all that was known about steroid chemistry could be contained in one slim notebook. Today all four walls of a large room, floor to ceiling, are required to hold the books and papers recording our knowledge in this field.

In our grandfathers’ time (1/50th of an inch ago on our twenty-mile scale) it required six weeks or more for a letter to travel from New York to San Francisco. Now we can watch athletes competing in the Olympic Games halfway around the world as the events are happening. A little over 1/100th of an inch ago we were earthbound. Today we not only soar in the air faster than any bird but we have broken our bond with the earth and its gravity, confidently looking toward a future of interplanetary space travel.

Further examples are superfluous. The point, I think, has been made. The present – the last 1/100th of an inch – is the most exciting and wonderful time to live in of all the ages since the beginning of the world.

IS MAN ONLY A PUPPET ON A STRING?

Yet as man brushes away his cobwebs of ignorance, as man acquires new knowledge of himself and his universe, he is swiftly approaching a point in time when he will be confronted with what may be a basic secret of nature, for the evidence is mounting that we are surrounded by cyclic forces, of which, as yet, we know almost nothing. These forces bounce us like marionettes on a string. They make us fight; they make us love. And all the while we think we are doing these things solely for rational reasons.

This is an unsettling concept. It ranks with the discovery that the earth is not the center of the universe, that man is not a special creature but has roots in the animal kingdom from which he developed, or that many of man’s actions result from subconscious loves and hates of which he is ordinarily ignorant.

Since it is demeaning to his self-esteem, it is perfectly understandable that man should resist any hypothesis that holds that his life and his universe vibrate in rhythms that are regular and at least partially predictable and are caused by a force or forces still unknown and possibly uncontrollable by him.

Nevertheless, the evidence that man is not one step down from the angels, sublimely in command of himself and his world, continues to accumulate. He is more like a character in a Punch and Judy show, pulled this way and that by environmental forces. And he will continue to be so manipulated until he solves the mystery of these forces. Only then will he be able to cut the strings and become himself.

Forward to Cycles: The Mysterious Forces That Trigger Events

This is the forward by FSC Chairman of the Board and Executive Director Dr. Richard Smith from the newly republished Cycles: The Mysterious Forces That Trigger Events by FSC Founder Edward R. Dewey. Purchase your copy today!

It’s very gratifying to bring this important work back into print in collaboration with Harriman House. The study of cycles and their influence on our individual and collective lives is enjoying a renaissance through the works of Neil Howe, Ray Dalio, Howard Marks and others. We welcome this opportunity for others to learn about this seminal work.

Edward R. Dewey was a pioneer in the study of cycles. His work in this area dates back to 1929 when he was hired by the Department of Commerce. He quickly became the Chief Economic Analyst for President Hoover, where, as Dewey put it, “Talk about being where the action is. Let me tell you, I was there!”

Dewey was tasked by President Hoover to figure out why depressions happened. “I was assigned the task of discovering why a prosperous and growing nation had been reduced to a frightened mass of humanity selling apples on street corners and waiting in line for bowls of watery soup.”

He gradually lost faith in the ability of economists to answer his question because every economist he spoke with seemed to have a different explanation. He became convinced that something was missing from the study of economics and he eventually concluded that this was a knowledge of cycles. He wasn’t the only one.

When Dewey established the Foundation for the Study of Cycles (FSC) in 1941 he was joined by leaders from the Smithsonian, Yale, Columbia, Harvard, the Institute for Advanced Study at Princeton, and several major corporations, as well as leaders from Canada and Great Britain. Moreover, the Foundation was truly an interdisciplinary undertaking, spanning economics, astronomy, biology and geology.

First published in 1971, Cycles: The Mysterious Forces That Trigger Events was written at the pinnacle of Dewey’s 40-year quest to develop a “new science of cycles.” It is a record, as he says, “of our successes, our failures, our hopes, our doubts, our frustrations, and our progress.” Let’s take a brief look at one of the cycles he studied extensively.

THE 41-MONTH CYCLE IN U.S. STOCK PRICES

One of the cycles documented by Dewey, and the one that will likely intrigue many new readers today, is a 41-month cycle in U.S. stock index prices from 1868-1957, as highlighted in Chapter 9.

Using the cycle detection methods developed by Dewey and others at the FSC, a similar analysis from the early 1950s to today reveals that a 41-month cycle (though a few weeks longer than the one Dewey identified) has indeed persisted through to the present day.

The solid black line in the accompanying chart is a detrended history of weekly data on the S&P 500. The dashed zig-zag line is an idealized 41-month cycle (182 weeks, to be precise). While the correspondence between the actual and idealized tops and bottoms isn’t perfect, there clearly remains a remarkable 41-month pulse in U.S. stocks. Moreover, it has been particularly evident since the 2008 top.

Dewey's 41-Month Cycle

THE PRESENT AND THE FUTURE OF THE STUDY OF CYCLES

Were Dewey still with us today, he would surely be both thrilled and a bit disappointed with the progress made in the study of cycles since his death 45 years ago.

On the one hand, he would be astounded with the technological progress since his day, especially in the areas of computational capacities and data collection. One of my personal joys at being involved with the FSC today is going through the archives, which are full of Dewey’s careful and beautiful handwritten efforts to collect data and identify cycles without the aid of computers. Documenting and discovering cycles was clearly a labor of love for Dewey. He would be in awe of our modern capabilities.

He would also be delighted with the renewed recognition that the study of cycles is receiving today through the work of prominent authors like Neil Howe (The Fourth Turning), Ray Dalio (Big Debt Cycles and The Changing World Order), Howard Marks (Mastering the Market Cycle), Peter Turchin (End Times), and George Friedman (The Storm Before the Calm).

On the other hand, Dewey would be a bit disappointed that these efforts and advances are taking place in relative isolation from one another, and that little effort is being made to advance an interdisciplinary science of cycles.

Dewey was clear that, for him, “comparative cycle study is the name of the game.” He said, “We compare cycles in all phenomena, searching for similarities and possible relationships among them.” He was interested, for example, in why there were observable 9.2-year cycles in phenomena as disparate as common stock prices, tree rings, lake levels, and grasshopper abundance.

Dewey’s burning question was, “Are there unknown environmental forces, predictable in their effects, that influence human beings and other forms of life and even nonlife here on earth – and, if so, what are they and how do they operate?”

Dewey’s question remains a powerful – yet controversial and challenging – question for us today. As Dewey himself observes early on in this classic work that you are about to explore, the notion that we are all “pulled this way and that by environmental forces” is “unsettling” and “demeaning to our self-esteem.”

Neil Howe similarly observes, in The Fourth Turning Is Here, that the idea of cycles “would strip those of us who live in the modern world of our most treasured privilege – a free and open – ended future in which we can aspire to be different from or better than our ancestors.”

The study of cycles has long been looked upon in the West as a questionable approach for understanding how our world works and what the future might hold. Whether it be Augustine in the Fourth Century warning against “invalidating salvation” by believing that, “the sky is responsible for your sin,” or our modern obsession with precision, specialization and the march of progress, a systematic and scientific study of cycles has not yet gotten the full attention it deserves.

It should not be a shocking hypothesis that there may be “tides in the affairs of men,” of which we remain unaware. Indeed, it would be more shocking if there were no such tides given how prominent rhythmic patterns are in our world.

Dewey hoped and believed that a knowledge of cycles would yield fruits such as the end of war and disease and the accurate prediction of weather a year or more in advance. While we may be more tempered from our own vantage point over half a century later, we should keep in mind that the first half of the twentieth century was a heady time for science and technology.

He was also honest about the fact that he could not yet explain the origins of the cycles he collected and catalogued. He saw his own work as being more akin to that of an early field biologist – collecting samples and analyzing data and sharing his work with other researchers and the public. He called others to the study of cycles.

It is often in periods of crisis that we find a renewed interest in the study of cycles. People begin to look beyond the ideals of linear progress as they search for deeper explanations for why things don’t seem to be going quite so well as they once were. That was certainly true in the early days of Dewey’s research and it is true again today. Why dig deeper, after all, when a rising tide is lifting all boats?

My own belief is that a recognition and appreciation of the unceasing and inescapable influence of cycles in our lives can help us to better regulate the highs and the lows. It can help us to remember during the upswings that the good times will not go on forever and, during the downturns, that better days lie ahead.

It’s when we fail to discover and acknowledge the influence of cycles that we really get ourselves into trouble. Neil Howe compellingly makes this point when he points out that, “The society that believes in cycles the least, America, has fallen into the grip of the most portentous cycle in the history of mankind.”

Edward Dewey saw the same thing over 80 years ago. His pioneering work and leadership in the study of cycles deserves wider recognition and we welcome the renewed interest that this new edition of his classic book will bring.

More importantly, we welcome the renewed interest in the study of cycles. Far from being merely a fearful study of the chains that bind us, a proper study of and respect for cycles opens paths of enhanced productivity, progress and peace as we learn to recognize and to cooperate with the many beautiful cycles of our treasured world.

Purchase your copy today!

This year's 4th annual Market Forecast showcases some of the greatest minds in finance and cycles analysis. This is the FSC's premier event of 2024. You don't want to miss it!

Join us live for Market Forecast 2024, a three-day event from January 9 to 11 at 4PM EST. We are excited to announce that this year's event will be available FREE to everyone!

This year we have an extraordinary lineup, including:

Robert Prechter
Larry Williams
Stan Harley
Jake Bernstein
Andrew Pancholi
Bill Sarubbi
Dr. Richard Smith
Lars von Thienen
Ron William

Backed by leading experts and trading professionals who have become legends in their fields, combined with the power of state-of-the-art cyclical analysis tools, we provide the FSC community with succinct and actionable forecasts. Be prepared for some shockers!

Reserve your seat. Sign up free today!

The FSC cycles app is the most powerful cycles analysis platform you can get. For years, it has powered the research and market analysis of the FSC community.

And in two weeks, we’re launching the biggest upgrade in its history. This, finally, is the tool that investors and cycles analysts have been waiting for. We’re ready to show you how it works.

Please join us for a LIVE demonstration of the new app on Thursday, November 30 at 4PM EDT.

FSC Chairman Dr. Richard Smith will lead the ~30-minute demo with the app’s creator and engineer, Lars von Thienen. Then we’ll open it up to your questions.

The upgrade includes:

New AI-powered analysis to pick dominant cycles
Price target projection (← This is huge. Timing + price target projections will blow your mind.)
Easy integration with your current analysis tools
So much more…

Important: We’ll offer one-time-only pricing at the live demo. Secure your seat now to guarantee access.

A small group of early adopters have been testing the upgrade for a couple of months, and the feedback has blown us away:

"Exceeded my expectations." C.B. | "A game changer." A.G. | "I wouldn't trade without it." R.S.

Now is the time to take your cycles work and investing to the next level.

There’s a lot more to say, but we’ll save it for the LIVE demo.

Claim your FREE spot on this upcoming virtual event!