By Ron William, CFTe, MSTA

Financial Cycles Summit July 2022 Recap

FSC hosted another successful Financial Cycles Summit, featuring key insights from six leading market experts across an extended three days. Once again, it marked a record attendance as part of the growing interest in the world of cycles.

The event kicked off with FSC Chairman of the Board and Executive Director, Dr. Richard Smith’s focus on “Cycles, Correlation, and Volatility” featuring a cycle review of global cross-assets, using our flagship FSC Cycles App. Smith later demonstrated a strategic framework using cycle analysis with a correlation matrix, to help identify critical relationships, while avoiding portfolio concentration risk. The importance of risk management was further discussed, using smart analytic tool “RiskSmith” that calculates probability distributions of market tail-risk, enabling a more astute risk-reward assessment.

Correlation Matrix

Thereafter, Ron William shared “Roadmap Cycle Insights”, warning of a peak in economic growth, marked by a valuation contraction and deteriorating technical signals. Thematic analysis included “Seasonality Patterns Realign”, signaling a likely bear-market rally into Q3, with the S&P500 likely to retest its 200-day trend average. The move which later transpired, equated to an average bear-market rally of +23%, with growing risk of a larger “Minsky Crash Pattern Ahead”. The ongoing currency debasement effect was also discussed in terms “EUR/USD Parity Reality,” with Swiss Franc proposed as one of the few last save haven’s standing.

In such a disruptive VUCA environment, scenario planning remains key. Audience members were invited to poll what future scenarios they expected, in terms of “good, bad or ugly,” with variations of the latter two most voted!

VCUA Future: Good, Bad, Ugly?

Day 2 followed with Bradley Rotter, described as “the Forest Gump of Finance” during his unique and rich fireside conversation with FSC Chairman Dr. Smith on “Crypto, Quantum Computing and Where We Go from Here”. Many golden nugget lifetime stories and insights were shared, including the evolution of financial innovation, Turtle Trading and the big picture on Crypto’s disruptive paradigm. A notable highlight was Rotter’s foresight of what he describes as the “commodity of money.” FSC audience members proved highly engaged with their questions, especially on the growing risks of central bank quantitative tightening and what it meant for crypto. As a special bonus, the FSC decided to share a link to this interview.

Jake Bernstein shared latest market insights using his science of trading approach, based on the S-T-F Model, of “Setup, Trigger and Follow-Through”. Additional overlays include price and indicator cycles, divergence, seasonals, sentiment positioning and patterns. Bernstein’s opening chart was Eurodollar futures curve, often described at the “plumbing of financial markets”, is approaching a major bottom, confirmed by a multi-year cycle and sentiment positioning. He clarified the importance of only looking at net decisions of commercial traders, akin to the so-called “smart money” which comprises of banks, insurances companies and government funds etc.

Similar inflection points were identified on 30- and 10-year treasuries, i.e. a bottom within interest rates, with the likelihood of it recommencing the rise thereafter for the rest of year. His expectation is for 10-year to bottom first, thereby offering a yield curve opportunity.

Looking at FX rates, the Swiss franc offered further evidence of safe-haven appreciation, while the U.S. dollar neared a top reversal and Euro’s new parity level hitting an important low. Additional FX rates included the British pound, Canadian dollar, and Japanese yen.  The latter chart proved most notable after successfully reversing in-line with Bernstein’s prediction live at the FSC Market Forecast Summit! Watch his presentation  and read our latest FSC Blog on “JPY: Catching the falling knife?”

JCY CME Futures

Peter Eliades featured as our special FSC guest using his proprietary model, based on Hurst cycle analysis. Eliades shared top highlights from his professional experience, most notably successfully calling the bottom in 1974! A brief educational simulation was presented on cycles theory, as part of what he described as “four sinewaves and a fundamental line.”

Most interesting was guidance on how to use cycles offsets to generate projections. Examples included a nominal time projection range from 10 weeks to 8 years.

20-Week Cycle with 10-Week Offset

Watch his debut interview with FSC board member Lars Von Thienen for more information about his work. Eliades later reviewed live charts, based on Hurst cycles – across the US equity markets. Latest market insights can also be viewed on his Youtube channel, including his successful call for a short-term equity market bottom, with Fox business.

Bill Sarubbi discussed his market insights the second half of 2022, predicting the stock market rally in August, with a likely weak September, but strong Q4. Interestingly, technicals and cycles are not in agreement. In terms of sector rotations, tech stocks is expected to underperform. Bonds and gold to rally in July and August, with the latter already triggering a oversold rally of $120!

Sarubbi also spoke on the macro, big picture, alerting 4 key factors to watch. 1. The widening gap between deteriorating fundamentals and market prices is likely to close at some point in 2022. 2. Rising inflation is not transitory, with the 1970s term of stagflation being appropriate. 3. Growing probability of a real-estate cycle top in 2023, which is likely to curtail consumer spending. Chart below highlights the profile of the 18-year real-estate cycle based on the work of Philip J. Anderson. 4. The excesses in the auction markets are a sign of a credit bubble, further distorted by inflation. His bottom-line expectation is for an equity market decline in 2022 and real-estate to follow in 2023, but a bubble burst appears unlikely.

Profile of 18-Year Real Estate Cycle

Source: Philip J. Anderson.

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Ron William Bio

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.”

Ron also applies a "market & mind" approach at IntensiChi, using the latest techniques in behavioural-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 Behavioural 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.