What Are Cycles?
A cycle is a series of events that is regularly repeated in the same order. The longer and more regular the series is repeated, the more predictable it becomes, until it cannot reasonably be considered a coincidence.
Evidence suggests that the natural world is subject to powerful forces that trigger fluctuations in various phenomena. When different, seemingly unrelated phenomena share an identical rhythm, it implies an interrelationship, or common cause.
The Foundation has developed four principles of cyclic behavior:
Cycles persist without change as far back as there are data. After distortion, cycles will revert to the pre-distortion pattern.
Cycles of any period tend to have counterparts in other phenomena and across disciplines.
Timing of cycles suggests a geographical pattern, regardless of phenomena.
Cycles of the same period tend to synchronize regardless of phenomena.
The Case for Cycles
FSC Founder Edward R. Dewey, when tasked with understanding why the market crashed in 1929, began to notice coincident cycles in business. Combining his extensive research of business cycles with data from leading biologists on cycles in nature and wildlife, Dewey was astonished to discover that:
Cycles of identical length were found in both disciplines.
Similar cycles from different disciplines reached their peaks and troughs at the same time.
In his compelling paper, The Case for Cycles published in 1967, Dewey presents years of research that convinced him of natural environmental forces that stimulate and depress mankind in mass.
Why Study Cycles
Whether seasons or rush hour, mankind has been using cycles to make plans for centuries. But what if we could identify cycles of war, cycles of mass shootings, cycles in the stock market, cycles in pandemics?
The study of cycles can be applied to any discipline in order to better understand its nature and predict its behaviors. The knowledge of predictable, repetitive patterns is a valuable tool in scientific projections with unlimited possibilities. Using cycles of rainfall, we could better prepare for drought. Using cycles of pandemics, we could better prevent the spread of a deadly disease.
Evidence of Cycles
As a clearinghouse for research by scholars, scientists, and nonprofessional investigators, the Foundation for the Study of Cycles has discovered that rhythmic cycles are a characteristic of more than 500 different phenomena.
If you are new to the concept of cycles, following are some straightforward examples of cycles related to financial markets:.
The first examples look at seasonality, which is based on a yearly cycle. When we average yearly cycles of the Dow Jones Industrial Average over 90 years some clear patterns can be seen.
In the graph ( below ) you can see that the market rises from January until it hits a high point around the beginning of May ( blue arrow is the rise, white dotted arrow pointing down is the high point ). It doesn’t necessarily happen every year, but it does happen more often than not, which means there is a high probability of the market rallying into May.
Called the Santa Claus rally, the second upswing is often a strong rally that begins in late October ( the white dotted arrow pointing up ) and ascends until the end of the year ( blue arrow ). Though it does not necessarily happen every year, you can see that by using cycles we can get the odds on our side.
A second example ( below ) uses the average path of gold over the last 40 years and reveals two clear seasonal patterns. The first one shows that gold often hits a high point in mid February and sells off into the middle of March ( down sloping blue arrow between two white dotted arrows ). The second seasonal cycle shows that gold starts to accelerate up in mid September making a high point around mid October ( ascending blue arrow between two white dotted lines ).
This example looks at a decennial cycle, which is based on 10-year increments. This graph ( below ) tracks the stock market in 10-year increments starting with 0 and ending with 9 ( e.g., 1920-1929, 1950-1959, 2000-2009 ).
Using data from 1900 to 2019, what becomes evident is that over the last 120 years, years ending in 5 have had the strongest returns and performance, and years ending in 8 and 9 are also very bullish – which was true in 2018 and 2019. On the other hand, years ending in 0, 1 and 7 tend to be bearish, with 0 being the most bearish – which we are seeing in 2020.
FSC Members have unlimited access to the FSC Library, which contains one of the world’s most extensive selections of statistical data. Following is a partial list of phenomena in which cycles have been identified.
- Abundance and activity of bacteria in human beings
- Hormone Cycles
- Air movements and wind direction
- Barometric pressure and temperature
- Glacial movements
- Radio propagation quality
- Terrestrial magnetism
- Abundance of crops, plants, seeds, and algae
- Assimilation and photosynthesis
- oncentration of growth substances
- Abundance and activity of insects
- Feeding, hatching, and migration
- Pigment changes of certain insects
- Earthquakes, geysers, volcanic eruptions
- Encrustations of archaeological artifacts
- Geologic epochs and periods