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

Unlocking Life’s Hidden Rhythms: The Ongoing Quest of the Foundation for the Study of Cycles

For centuries, humans have sensed that life doesn’t move randomly — it pulses. From the steady heartbeat and the daily sunrise and sunset, to the rollercoaster pattern of markets, rhythms seem to govern everything. What if these weren’t just coincidences, but the very cyclic DNA of life?

Nearly 100 years ago, economist Edward R. Dewey began a lifelong quest to understand these patterns. His work laid the foundation for what would become the Foundation for the Study of Cycles (FSC) — a global effort to uncover the deeper forces that shape our world.

From Solar Activity to Human Behaviour: A Legacy of Insight

Dewey wasn’t alone in this exploration. He built on the work of early visionaries like William Herschel, Raymond Wheeler, and Alexander Chizhevsky — who discovered striking connections between solar activity, climate, and economic cycles. Their insights suggested that planetary and solar dynamics might subtly shape human activity.

At FSC Live 25, members of the FSC Science team made key contributions: Iain Mackay revisited John Nelson’s work on planetary alignments and communication technology, while Ray Tomes’ harmonics theory demonstrated how complex cycles often emerge from overlapping, simple rhythms — much like chords in a symphony.

Introducing the MMM Framework: Macro, Mood, and Markets

One of the educational highlights at FSC Live 25 was in sharing the Macro, Mood, and Markets (MMM) framework by FSC Development Director Ron William, based on a scientific feedback model developed by Dr. Campion, Associate Professor in Cosmology & Culture at the University of Wales Trinity Saint David.

The MMM model connects three essential layers:

Macro cycles: Solar and geomagnetic influences, such as sunspot activity and magnetic storms (as re-explored by FSC Director Lars von Thienen)
Mood cycles: Biological and psychological rhythms studied in heliobiology, a field pioneered by Alexander Chizhevsky
Market cycles: Patterns in financial behaviour shaped by collective human emotion and sentiment

Scientific Feedback Model

By linking these layers, the MMM framework offers a practical tool to explore how natural forces resonate through human psychology and ultimately, market dynamics.

For example, periods of intense solar activity have been correlated with spikes in market volatility and shifts in investor sentiment. Market professionals using the MMM framework can anticipate broad mood changes during these times — adding depth to both economic forecasting and psychological understanding.

A Rediscovered Letter and a Renewed Mission

In a fascinating historical twist, a 1973 letter from Dewey to harmonic theorist John Addey was recently uncovered. In it, Dewey expresses his openness to integrating harmonic and cosmological models with empirical cycle data — well ahead of his time. This letter serves as a symbolic bridge between eras — a reminder that the exploration of cycles is both ancient and evolving.

Letter from E.R. Dewey to John M. Addey June 1973

This letter was shared by Dr. Campion, Professor of Cosmology in Culture at the University of Wales Trinity Saint David, during my recent visit for a summer study programme. We are pictured together (below) during the visit, where we discussed the FSC’s legacy and its connections to planetary and harmonic studies.

Dr. Campion, Professor of Cosmology in Culture at the University of Wales Trinity Saint David and FSC Development Director Ron William

The Map Is Not the Territory

As the saying goes, models don’t define reality — they help us navigate it. The MMM framework acts as such a map, offering a structured way to explore the connections between nature, psychology, and market dynamics.

FSC Chairman Richard Smith reflected on Dewey’s final hope: that if he couldn’t solve the great cycle mystery, someone else — another Kepler — would carry it forward. Today, the FSC community embraces that vision with growing momentum.

Perhaps It Will Be Us

At the Foundation for the Study of Cycles, we believe the quest to decode life’s deeper patterns is more relevant than ever. Scientists, analysts, and curious minds from around the world are joining forces to reveal what lies beneath the surface of change.

Thank you to all FSC Members for all your kind feedback and insightful questions on our FSC blog series. I welcome more interaction at ron.william@cycles.org

Ron William, CFTe, MSTA

LinkedIn, Twitter

Ron William, CFTe, MSTA, is a market strategist and educator/mentor with more than 20 years of experience working for leading macro research and institutional firms, producing tactical research and trading strategies. He specializes in global, multi-asset, top-down framework, grounded in behavioural technical analysis, driven by cycles based on the "Roadmap" signature model of veteran market technician Robin Griffiths, published in his book “Mapping the Markets.”

Ron also applies a "market & mind" approach at IntensiChi, using the latest techniques in behavioral-risk models and neuroscience sourced from expert groups. He further supplements with mentoring/coaching, trained by the International Coaching Federation (ICF), and teaches a regulatory approved masterclass in Applied Behavioral Science, with investment, private banks and CFA Societies.

Ron's primary work, as part of his current institutional market advisory firm (RWA), acquired global industry recognition as winner of “Best FX Research” in 2020. Financial media programs and industry publications regularly feature his market insights, including “Is the big cycle about to turn?”, predicting the 2020 crash and alerting the “Minsky paradigm” of 2020 H2-2022.

Driven by high-integrity education, Ron serves as part of the education committee of the International Federation of Technical Analysts (IFTA), Development Director at the Foundation of the Study of Cycles (FSC), Head of SAMT’s Geneva Chapter, and an honorary member of ESTA. He is also a visiting lecturer at universities, active guest speaker for the CFA, CAIA and CISI, and senior teacher at colleges offering an accredited diploma in trading and investing.

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.

As starts go, this year has been unsurprisingly weak, with SPX still capped near its all-time high. What next? The January barometer (JB) seasonality pattern for 2025 will be either of two scenarios: best-case, an extended linear uptrend (+/+), or worst, a volatile cycle and negative surprise into year-end (+/-), as illustrated within the JB scenario matrix in my previous FSC vlog.

However, in Asia, where I used to live, a collective population of nearly 2 billion recently celebrated their New Year by saying “gōngxǐ fācái,” an expression that wishes “health and prosperity.” One thematic question to ask is what will the 2025 (Wood) Snake Year likely bring? For those less familiar with this ancient timing system, also known as the Lunar New Year, it begins on the second new Moon after the winter solstice. Moreover, it is a lunisolar calendar, based on astronomical observations of the Sun’s position in the sky and the Moon’s phases.

Traditional Chinese zodiac use archetypal animal symbols to describe the qualitative nature of each lunar year cycle of 12 years. A matrix of five elements is further overlayed; (Earth, Wood, Water, Fire & Metal), so that each year only rotates once in a lifetime, every 60 years – also known as the Chinese sexagenary cycle.

Last year I wrote about the 21.5% jump in the SPX associated with the “Wood Dragon.” Figure 1 illustrates the updated heatmap of U.S. equity market returns over the last 100 years. Empirical analysis shows the highest returns in the Year of the Rabbit, with third highest attributed to Dragon and lowest to the Horse (Figure 2).

Find more in-depth academic studies here. The last Wood Snake year appeared in 1965, when there was an 11% gain in SPX. However, outlier negative returns still happen, typically across the metal element, during 2001 and 1941. Another example is in earth element during 1929. See CLSA analysis for recent examples.

Of most interest is the latter period remembered for what led to the Wall Street crash. This merely serves as a historical risk analogue that overlays with eastern cyclical matrix. It implies caution and potential event risk ahead. This remains in line with my view, warning of a major peak in equities, weighed by triple whammy of headwinds, notably momentum extremes, rotation fragility, and cycle asymmetric risk, particularly into the month of March.

Long term our Kondratieff wave analysis suggests an inflation resurgence into H2 2025 that should offer further disruption. Naysayers of this eastern calendar system should temporarily suspend their disbelief and simply reflect on these analogues as potential risk scenarios, especially given that SPX continues to signal a trend exhaustion (wave 5) that is still in play (Figure 3). On a final note, in Chinese feng shui, the Snake signifies a year of renewal and agility. Although this also requires a robust and adaptive strategy. “Gōngxǐ fācái!”

Thank you to all FSC Members for all your kind feedback and insightful questions on our FSC blog series. I welcome more interaction at ron.william@cycles.org

Ron William, CFTe, MSTA

LinkedIn, Twitter

The Foundation for the Study of Cycles (FSC) hosts two major summits annually at the beginning of the year and midyear: Market Forecast and the Financial Cycles Summit.

The events bring together leading cycles practitioners and trading professionals using state-of-the-art cyclical analysis tools.

This year’s midyear summit – six hours over three days – brought a few surprises and even a little controversy. Most importantly, it gave participants succinct and actionable forecasts.

You can watch all of the replays on Cycles TV. Following are brief summaries of each presentation (six in total).

Peter Eliades

The event kicked off with keynote speaker, Peter Eliades, market analyst and founder of Stock Market Cycles newsletter. Eliades is on alert for a crash scenario akin to the historical rhyme pattern of TMT 2000. Most notably, he flagged record concentration risk in tech stocks with NVIDIA’s accounting for 50% of the S&P500 YTD gains. Further broader market fragility is also seen (chart). However, several other experts remained bullish.

Market Fragility Akin to 2000

Most notably, Bill Sarubbi, FSC Board Member and regular Forbes contributor, recalled the challenges of timing a melt-up phase, citing “too much money is lifting all asset classes”. Conversely, his analysis points to a healthy rotation, with some tech stock bifurcation, coupled with new leadership into areas such as banks and energy. Sarubbi’s composite cycle model remains bullish into Q3 2024 (chart).

Monthly S&P Cycles in Q3 2024

Jake Bernstein, FSC Board Member and publisher of Jake Bernstein's Weekly Futures Trading Letter, shared latest market insights using his science-of-trading approach. Additional overlays included price and indicator cycles, divergence, seasonals, sentiment positioning, and patterns. Bernstein remains bullish on commodities across the industrial, precious metals, and agricultural sectors. He expects copper, gold, and wheat to surge into 2026 (chart). In cross-assets, his timing analysis signals a GBPUSD cyclical low and unwind in U.S. rates.

Gold Surge Into 2026

Lars von Thienen, FSC Board Member and host of Market Cycles Report, continued his deep-dive focus on crypto using the FSC's timing model, which marked the recent key inflection points, and included the latest bottom and end of winter season. He reviewed Bitcoin’s 200-day cycle, overlaid seasonal and having cycle data, which signal a tactical unwind. Although a renewed surge is expected into early 2025 followed by another top pattern (chart).

Gold Impulse Wave Ahead

Dr. Richard Smith, FSC Chairman of the Board and Executive Director and host of Trading Market Cycles, highlighted trading beliefs, approach, and short-term cycles. He primarily focused on U.S. equities marked by price-time divergences. Additional strategies included risk management and diversification (chart), which signaled beneficial portfolio exposure to USD.

Portfolio Correlation Matrix

Andrew Pancholi focused on macro cycles based on the patterns of human behaviour. His analysis continues to warn of multiple disruptive forces as part of a shift from “globalisation to polarisation”. Pancholi warned of revolutionary tensions in the U.S., populist trends across the world (chart), amplified by the 40 elections in 2024. What lies ahead? Expect a rise of so-called black-swan events, amplified by geopolitical tensions and likely war drums.

84-Year Populist Movement Cycle

Meanwhile, as part of the FSC leadership team, I also shared insights, themed on my “behavioural inflection point” thesis, still pressured by a triple whammy of headwinds, momentum extremes, rotation fragility, and cycle asymmetric risk. The U.S. election cycle is also featured, predicting volatility in the coming months ahead (chart).

Election Cycle Pattern

You can watch all FSC presentations here.

Thank you to all FSC Members for all your kind feedback and insightful questions. I welcome more interaction at ron.william@cycles.org

Ron William, CFTe Bio

LinkedIn, Twitter

Ron William, CFTe, is a market strategist and educator/mentor with more than 20 years of experience working for leading macro research and institutional firms, producing tactical research and trading strategies. He specializes in global, multi-asset, top-down framework, grounded in behavioural technical analysis, driven by cycles based on the "Roadmap" signature model of veteran market technician Robin Griffiths, published in his book “Mapping the Markets.”

The Foundation Study for Cycles (FSC) recently hosted Market Forecast 2024, featuring key insights from several leading market experts. The event kicked off with Larry Williams reviewing his non-consensus bullish trades on S&P500 in 2023. Here and now, he forecasts a decline into Q2 2024, marking a volatile mean-reversion environment thereafter (Figure 1). Watch Larry Williams' presentation.

Interestingly, his cycle framework is also used on macro indicators, notably inflation, which correctly predicted the acceleration into 2022 and consequential decline that is now likely to stabilize. This is in-line with my tactical view, although looking ahead, the expectation remains for rolling waves of inflation volatility, akin to the 1970s analogue, marked by rollercoaster equity market price swings and broader geopolitical risk premium.

Lars von Thienen continued his deep dive focus on Crypto, using the FSC's timing model, which marked the recent key inflection points, including the latest bottom and end of winter season, now into summer ahead of the next halfing cycle (Figure 2). A point of great interest for FSC attendees and myself was his discovery of a fractal timing pattern of 5 up, 3 down, akin to the well-known Elliott Wave principle. Watch Lars von Thienen's presentation.

Jake Bernstein shared latest market insights using his science-of-trading approach. Additional overlays included price and indicator cycles, divergence, seasonals, sentiment positioning, and patterns. Bernstein’s bullish headline charts included agricultural commodities such as soy beans and Wheat. He also flagged copper, fuelled by a strong COT positioning build-up (Figure 3) and growing probability for an explosive rise on Palladium. Watch Jake Bernstein's presentation.

Robert Prechter, founder, and president of Elliott Wave International shared latest insights on "Levitating optimism in the stock market" - aptly describing the historic level of irrational exuberance, whereby sentiment will inevitably turn. Divergences across several key market proxies, coupled with key Elliott wave inflection points and related cycle timing, signal likely risk from Q2 onwards. Gold remains bullish for now (Figure 4), but the broader direction of commodities remains an open question amidst polarising forces of inflation-deflation. Watch Robert Prechter's presentation.

Enjoy the post session interview, discussing potential historical rhymes of - including 1929, 1700s and a millennia cycle reverting back to the Roman Empire! More to follow, based on research that I am doing in this area. Additional points of interest, include his read on the 4-year and presidential cycle, ahead of the coming US elections and what reactions to Fed policy likely signal for markets.

Bill Sarubbi analysis favours an equity rally into Jan, turning flat/corrective into Q1, followed by a panic cycle-selling climax in March. Timing is based on his dynamic composite cycle model using the 1-4-10-year pattern (Figure 5). He also still expects growth sectors to continue their trend performance, but likely at a slower rate, with a likely broadening rotation from energy stocks. Watch Bill Sarubbi's presentation.

Stan Harley, a former Top Gun fighter pilot, featured his "market kinematics" framework, demonstrating harmonic cycles in action across key markets, notably US equities, interest rates, gold & Bitcoin. Watch Stan Harley's presentation.

Andrew Pancholi interviewed Akhil Patel and they talked about how the 18.6 year can transform your investment and it’s prediction for a real-estate top into 2025/26 (Figure 6). Watch the presentation.

As part of the FSC leadership team, I also shared insights, themed on “Fly me to the moon & back” sharing key insights on what he themes a “behavioural inflection point”, following the dovish central bank “Fed pivot”, weighed a triple confluence of momentum, sentiment and timing fragility. Major macro markets included S&500, US10YR, Gold, using a range of timing overlays, including our FSC model (Figure 7). Watch the presentation.

Review all FSC Market Forecast 2024 presentations here.

Thank you to all FSC members for all your kind feedback and insightful questions on our FSC blog series. Welcome more interaction on ron.william@cycles.org

Ron William, CFTe Bio

LinkedIn, Twitter

Review FSC Market Forecast “Navigating volatility in 2024” for in-depth analysis.

Welcome to 2024! – the worst new year market reaction since 2000 TMT and return start since 2019 (Figure 1). The market legacy theme song remains Sinatra’s timeless classic, “Fly me to the moon” and now potentially back!

Worst New Year Cross Asset Return in Two Decades

Those lyrics aptly symbolise the ongoing irrational exuberant market, with S&P500 extending its rally from November 2023 lows, rocketing 17%, the largest of its kind in 30-years! Many investors enjoyed the FOMO high-altitude moon flight experience but must now heed astronaut Neil Armstrong’s guidance to always have an exit strategy for your journey back to a more normal earthly gravity force!

The big question now: Are risk assets verging on a behavioural inflection point? As investor sentiment realises their “false dawn” and “market perfectionism,” following the long-awaited dovish Fed pivot. My conviction is that stocks and bonds will see a year of non-consensus in 2024, as featured in CNBC interview.

Indeed, the recent Santa Claus Rally (SCR) is unwinding sharply, as expected, from historically overbought conditions +3STD, with major equity indices now pressured by a strong DeMarkTM momentum exhaustion signal.

Recall the SCR seasonality pattern, which typically extends gains during late December into early New Year, as a prelude to future market performance (Figure 2). However, my previous FSC work (blog, webinar & media interview) - highlighted an alternative scenario proposed by seasonality expert Yale Hirsch, that “if Santa Claus should fail to call, bears may come to Broad and Wall” – signifying the value (Russell 2000) and blue chip (DJI) stocks.

Santa Claus Rally (SCR) Bull & Bear Scenarios

This poetic omen seems to be playing out, driven by the notable 5% reversal in Russell 2000, which previously succumbed to the year-end “dash-for-trash” – mostly in small-cap and low-quality stocks (Figure 3a). Even the infallible Magnificent 7 mega-cap growth tech stocks are underperforming YTD (Figure 3b). This all adds further fragility to what was already a narrow rotation, along with economy-sensitive stocks that will likely feel the pressure as slowing growth impinges on labour markets and corporate margins.

Big Pain in "Broad" Value Stocks & Magnificent 7 Trend Underperforms

From a tactical perspective, the Foundation for the Study of Cycles (FSC) timing model continues to signal asymmetric risk into early Q1 2024, with the S&P500 retracing below its July 2022 peak, near 4610, into price support zones of 4500-4450 and 4370-4340 (Figure 4). Additional cycles project either a new top or further downside pressure from April onwards.

S&P500 Asymmetric Risk Into Q1 2024

Looking at the path of rates, US10Y is already unwinding from oversold conditions -2STD, near key support zone at 4.00-3.85% (Figure 5). This is a historical analogue to its October 2022 decline, which paved the way to the 5% threshold. It also remains in-line with my view for rates to be structurally higher for longer, with rolling waves of volatility.

US 10Y Surge Ahead, With Key Support at 4%

Moreover, behaviourally speaking, the unwinding of the rates and stock action of the past two months (December & November) signals that much of the positive tilt derived from potential rate cuts is already priced in. Also, even as markets expect aggressive rate cuts, a recent University of Michigan sentiment survey shows that consumers still expect inflation to rebound to 4.5%.

Given that this transitionary environment is likely to bring volatility, consider a more prudent barbell strategy with risk asset selectivity, profit taking, and with downside protection. In parallel, it’s naturally wise also to build up a robust defensive play, such as gold, cash, quality bonds and non-correlated portfolio risk. Gold continues to shine, as its latest multi-year breakout above the $2k glass-ceiling targets $2700 (Figure 6).

Gold Major Breakout Targets $2700

Gold’s “transformation period”, is fuelled by broad strength, weighed by FX debasement and recent bouts of safe-haven flows, both from default risk and broadening geopolitical tensions. Join the FSC Market Forecast 2024 free online event next week, 9-11th Jan, 4pm EST, for in-depth analysis from myself and industry peers. Stay alert, until then!

Thank you to all FSC members for all your kind feedback and insightful questions on our FSC blog series. I welcome more interaction on ron.william@cycles.org

Ron William, CFTe Bio

LinkedIn, Twitter

Frank Sinatra: Santa is Coming to Town

Frank Sinatra ‘The Voice’ once sang the 1934 festive classic “Santa Claus Is Coming To Town” and with Christmas almost here and the year drawing to a close, investors are eagerly anticipating the so-called “Santa Claus Rally” (SCR). But after many benchmark equities scoring their best month in November, and for several quarters, can we still expect a SCR rally in December 2023?

In a recent media interview, I argued the rally will likely be muted and that perhaps Santa had already gifted portfolio returns earlier during the US Thanksgiving holiday. Our global ranking model captured the broad tactical surge in risk proxies (Figure 1, 2, 3). US equity outperformance was not only led by another surge in growth-mega-cap, but also marginally broader participation from YTD laggards. Using a macro lens, this followed the rate unwind in US10YR, under its historic 5% threshold and the Fed’s “silent pivot”.

Global Ranking Model

Technically speaking, an oversold equity market reaction was also partly expected after the 3-month drawdown. However, the extent of this blow-off rally surprised most, including myself. Once again, we are reminded about the unpredictable nature of an irrationally exuberant market. What next? Recall the warning in Sinatra’s song: “You better watch out, you better not cry, you better not pout, I’m telling you why; Santa Claus is coming to town!” Indeed, many patently believe this holiday-inspired buying bias will still extend gains during the back-end of December into early new year, which typically leads to +1.3% gain and marginally stronger in pre-election years (Figure 4).

An alternative scenario proposed by Yale Hirsh, seasonality expert and author of the popular Stock Trader’s Almanac, is that “if Santa Claus should fail to call, bears may come to Broad and Wall” – that is, the value (Russell 2000) and blue-chip (DJI) stocks. According to historical studies the SCR seasonality pattern is often muted in overbought, flat or bear market regimes. Examples include 2000 TMT, 2008 GFC, 2021-2022 topping process and likely now (Figure 5, 6, 7), particularly into this latest setup.

Santa Claus Rally & Failed Historical Rhymes

S&P500’s blow-off rally is at a key inflection point, unwinding from +2STD overbought conditions (Figure 1). The market is further weighed by price resistance zone between 4560-4610 (trend-2021/22 top & July 2023 high). However, confirmation of a tactical reversal only occurs if price fills the recent exhaustion gap at 4460/20. FSC timing model signals risk into Q1 2024 (Figure 8 & 9).

S&P Blow-Off Rally at Key Inflection Point

Extreme Market Concentration Risk & Fragility

Thank you to all FSC members for all your kind feedback and insightful questions on our FSC blog series. Welcome more interaction on ron.william@cycles.org.

Ron William, CFTe Bio

LinkedIn, Twitter

“This is gold, Mr. Bond. All my life I’ve been in love with its colour … its brilliance, its divine heaviness.” An infamous line from the antagonist Auric Goldfinger, in the illustrious Bond movie series by Ian Fleming, aptly personifies an appreciation of all things gold following its latest 10% surge. It has retested the $2k glass ceiling, amidst heightening geopolitical tensions, while also breaking historical macro correlations with real bond yields.

In behavioural terms, the yellow metal is reactivating a 13-year bullish pattern that visually resembles a “cup and handle” (C&H), where the cup is in the shape of a curved basing formation, symbolising trading accumulation, and the handle, which is typically marked by either a sideways or downward consolidation, that leads to the upside breakout signal. The C&H pattern, originally popularised by veteran investor William O’Neil in his classic 1988 book on technical analysis, currently signals a minimum price objective of $2,700, with overshoot risk into $3k (Figure 1). What makes this pattern of greater significance is that, if/once confirmed, it will reverse a previous widely acclaimed triple top signal, near $2070, that would have attracted much bearish consensus.

Broader upside scope for gold is evidenced by its rising tide across a basket of world currencies (XAUWCU). Its October monthly surge triggered a record new high breakout, that will likely extend the long-term uptrend by a further 80% (Figure 2).

From a macro perspective, this is ultimately a reflection of the accelerating currency debasement effect, weighed by ongoing restrictive monetary conditions and consequential secular inflationary forces ahead.

On this point, gold is sending out an interesting message, by its extraordinary divergence from real bond yields, thereby breaking a historical inverse correlation, of up to 91%, between gold and the yield of 10-year TIPS, during 2007-2021 (Figure 3).

There are several plausible factors, led by bullish market forces, supported by gold’s relative outperformance, geopolitical safe-haven flows and central bank demand. Charlie Morris, CIO of Bytetree, argues in his latest Atlas Pulse report that gold is likely experiencing a “transformational period”, whereby “TIPS are mispriced (too cheap) and understating inflation”. This aligns with our long-term structural inflation outlook, based on the Kondratieff wave. Interestingly gold remains a contrarian trade in the short-term, weighed by negative sentiment proxies, with headline news stories at decade lows, lagging ETF liquidity flows since 2020 and divergent mining stocks (Figure 4).

Looking ahead for plausible risk scenarios, it’s worth recalling gold’s historical rhyme, in periods of crisis, as highlighted in 1980 and 1973, which included the Soviet-Afghanistan War, Iranian Revolution and Arab-Israeli “Yom Kippur” war. In both analogues, gold typically spiked by up to 700%, while previously marking its inflation-adjusted peak near $2,700 (Figure 5).

The prospects of a commodity super cycle will offer broader support (Figure 6), notably the FAANG 2.0 industries, currently led by fuel, defense, and gold.

Thank you to all FSC members for all your kind feedback and insightful questions on our FSC blog series. Welcome more interaction on ron.william@cycles.org.

Ron William, CFTe Bio

LinkedIn, Twitter

Hedgeye (three bears): Goldilocks sent us.

This time last year broad risk markets accelerated their corrective wave, notably S&P500, marked by a near -20% peak-to-trough drawdown (mid-August & late-October). Will seasonality headwinds strike again? The month of September is a negative outlier due to a range of factors, as published in previous FSC blogs. Bottom-line, it’s historically the worst performing, generating a lowest monthly return of -0.6% and lowest probability of a positive return of 46% - according to a back test of S&P500 during 1964-2022 (Figure 1).

September Outlier: Monthly Return Stats for the S&P500 1964 - 2022

While this annual timing pattern is one of the most reliable and worst performing, it’s not a certainty, more so, given the near 50% hit ratio. Additionally, as with all heuristic models, there are exceptions, with best/worst sample periods to the historical average of 9%, -12% and STD of 4.4%. Also important, is to blend quantitative statistical analysis with qualitative charting methods, to offer valuable context. For example, the broader negative seasonality pattern is a three-stage process, aligned with our “Roadmap signature” of a “price fall, oversold rally, followed by the rest of the fall” (Figure 2).

Three-Stage Seasonality Pattern

In the latest market setup, S&P500 peaked into late-July, marked by a key-day reversal, followed by a sharp decline, predicted in earlier FSC blogs. Currently, the market breaking down. A sustained corrective wave unlocks further downside risk into 4220 and 4130. Expect the worst period of September’s seasonality pattern to trigger in the backend (Figure 3), with likely rollover into October, which traditionally marks a final capitulation ‘true low’- often associated with the market anniversary of a fall-crash signature.

Beware of Late September

Recall 1987 Black Monday, 9/11 and the failure of Lehman ahead of the 2008 GFC, all occurred in this period, each resulting in big selloffs. The so-called September effect could be particularly chilling this year due to a confluence of macro event risks. These include rising crude oil prices, inflation risks and China’s pressured economy.

Review our follow-up theme on a “Crude Oil reawakening…”, and interview, highlighting a recovery base pattern targeting $105 and consequential impact to inflation. The uncomfortable combination of rallying oil and US10YR at new cycle highs, is disrupting the goldilocks soft-landing scenario and triggering a rotation into the “persisting inflation & sticky rates” narrative, adding further pressure on equities and valuations.

Interestingly, my industry peers remain split. Sharing the bearish camp, veteran technical anlayst Milton Berg warns of a potential 50% crash as severe recession sets in. Real vision hosted an interview with us together, in late 2022, featuring big picture views still in play. Meanwhile, leading the bull-case, BofA strategist Stephen Suttmeier cited in a note “the best setup for both September and the rest of the year is when S&P500 rallies between 10-20% [in H1]” (Figure 4). However, be mindful the S&P500 remains historically fragile, both in terms asymmetric risk and ongoing narrow leadership (Figure 4). Stay alert!

FAANG Concentration Risk

Thank you to all FSC members for all your kind feedback and insightful questions on our FSC blog series. I welcome more interaction on ron.william@cycles.org.

Ron William, CFTe Bio

LinkedIn, Twitter

According to the expanded cycle framework that I use, originally based on the “Roadmap signature” model of veteran strategist and mentor Robin Griffiths (Figure 1 ABC), the U.S. economy remains in a late-stage pending recession, but is now shifting into 2024 as part of a multi-year transition.

The Kondratieff wave which, drives trends of interest rates, predicted the bottom in 2020 and structural rise in 2022, marking a winter season amplified by a great debt burden (Figure 2).

The same k-wave is part of a ‘creative destruction’ force that predicts long periods of innovation. It confirms that we are now in a sixth innovation ‘echo’ wave - since the Industrial Revolution, that is likely to last 20-25 years, largely driven by technological developments in AI and robotics (Figure 3).

Primarily for this reason, the latest AI boom proved stronger than expected, with YTD performance quadrupling for some leading stocks (Figure 4), NVIDIA hitting the $trillion valuation and market internals historically more divergent even than Y2K and 2008 GFC. The warning about “The Perils of ‘Painting the Tape’” remains!

Watch S&P500 equal-weighted, as it nears YTD peak levels, into historic +2STD threshold (Figure 5). Only above here would signal broader market rotation and stronger risk appetite.

Alternatively, failure implies pending mean-reversion risk, further weighed by negative seasonality, typically led by a peak into August and fall-crash pattern into September-October (Figure 6). More seasonality analysis to follow in future FSC blogs.

Thank you to all FSC members for all your kind feedback and insightful questions on our FSC blog series. I welcome more interaction on ron.william@cycles.org.

Ron William, CFTe Bio

LinkedIn, Twitter

Sound the alarm! The recent escape-velocity melt-up in mega cap tech, is likely to suffer the perils of "painting the tape," based on historic divergences in market internals, greater than Y2K TMT and 2008 GFC. Jesse Livermore, a famous trader of the early 20th century and publisher of the classic trading bible Reminiscences of a Stock Operator was known for taking advantage of a previous version of this market anomaly. Generations later, the term evolved to describe artificial and unsustainable market rises that would typically carry large asymmetric risk. However, as many astute professionals know, this is only a market setup and not a timing signal.

Chart 1: Mega-Cap Tech Unwind

What’s changed now is the intersection of technical, macro, and political factors. Technically, several key ratios are now at a critical tipping point. One headline example is the growth/value ratio of Nasdaq 100 to Russell 2000, recently hitting its Y2K TMT record bubble peak (Fig 1). Breadth divergences not only in the broad market, but in Tech itself, with the no. of falling tech stocks now back at yearly lows (Figure 2). Remember, this is against the backdrop of the narrowest breadth measure since Y2K TMT and 2008 GFC. Currently, the growth/value ratio is unwinding sharply lower, with small cap marginal outperformance, fuelled by record call volumes in IWM (Figure 3).

Goldman Sachs points to changing macro sentiment, as the soft-landing narrative is once again gaining traction (Fig 1) and safe-haven flows into mega-cap tech unwind. This follows the overheated debt-ceiling political drama, now resolved, with President Biden claiming a “crisis averted”.

Chart 2: Calm After the Storm

However, many remain concerned about elevated risk factors, notably FED TGA, Reverse Repo and $3 trillion gorilla debt supply issuance (Fig 7) vs. lack of demand (Fig 8), with foreign holdings of USTs reaching the lowest in 19 years! This concern is further amplified by diminishing availability of UST buyers.

Chart 3: The AI Boom, ST Overbought, but LT Theme

The AI boom proved stronger than expected, with YTD performance quadrupling for some leading stocks (Fig 1) and NVIDIA hitting the trillion $ valuation. Perhaps most ominously, the recent exuberance has come at a time of tightening financial conditions as AI trumped The Fed (Fig 2).

While there will undoubtedly be individual stocks that deliver accelerated growth from spending on AI this year, it is unlikely to be enough to change the trajectory of the overall earnings trend in a meaningful way. Instead, it may pressure margins further, as companies decide to invest in AI despite decelerating economic growth, as predicted by our Roadmap cycle model. Looking ahead, upside potential remains, as highlighted by L&G ETF AIAI base pattern and high score, relative to the world (Fig 3).

Chart 4: Tech Downside Risk

Moreover, the Foundation for the Study of Cycles (FSC) model signals imminent downside risk for Nasdaq (Fig 12). Sentiment flows are polarised (Fig 13 & 14), implying the rally had been front-loaded and could now prove to be seen as pump and perhaps ‘dump’ next? Interestingly the 3x short Nasdaq 100 ETF (SQQQ) is currently taking in the most cash ever YTD.

A barbell strategy, with downside protection is likely the next game in town during H2 2023. Be selective with risk assets, consider profit-taking, while building up defensive plays, such as gold, cash, quality bonds and non-correlated portfolio risk.

In behavioural terms, it’s time to switch from FOMO to FOLO. The performance equity curve (Fig 15) demonstrates that fear (FOLO) beats greed (FOMO) in volatile markets. Take note of this well known market wisdom shared by many pioneers. Warren Buffett warns of the importance of risk management in his biblical reference to the Noah’s Ark principle “predicting rain doesn’t count, building arks does”. While Stanley Drukenmiller recalls his worst trading mistake during the Y2K - due to FOMO extremes and the need “to play."

Feature media interview.

Chart 5: Fear (FOLO) Beats Greed (FOMO) in Volatile Markets

Read the article on Ron William's Substack.

Thank you to all FSC members for all your kind feedback and insightful questions on our FSC blog series. Welcome more interaction on ron.william@cycles.org.

Ron William, CFTe Bio

LinkedIn, Twitter