By Bill Sarubbi, FSC Board Member

May 28-30 is likely a low. The period of May-June, EOM strength will begin on May 31 and run to June 12. This period has been up 64.4% of the time. The expected return is the sixth highest of the 12 months. June is likely to be a positive month. This period of strong seasonality is supported by dynamic cycles. Below, are both the daily and the weekly S&P cycles. The buy signals have been accurate 92% of the time (10 of 12) in the last year. All 6 weekly buy signals have been profitable. The combination of this trio of rhythms will likely propel the S&P to 4250 and higher.

We are thrilled to announce the release of a new upgraded version of the Cycles Scanner, Cycles Scanner: Analyst. Available to Members only, this powerful cycles analysis tool is unrivaled!

When you are a Member, full use of Cycles Scanner: Basic is included in the $150 Membership fee. The new upgraded Cycles Scanner: Analyst offers enhanced features that are essential for advanced cycles analysis.

Special offer: $250 savings for the next 30 days only!

Once you are a Member, the cost of Cycles Scanner: Analyst is $99 a month or $849 for a year.

However, if you upgrade to Cycles Scanner: Analyst by June 25, 2021, you can get the annual upgrade for the extremely low price of $599 for the first year! That is a $250 savings!

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Ray Tomes, FSC Board Member and Science Director, will host the new Saturday Science Summary on Cycles TV. The recorded broadcast will explore recent science news through the lens of cycles analysis.

New episodes will be posted on Saturdays at noon ET.

Tune into Cycles TV: youtube.com/c/FSCtv

Ask questions or suggest topics in the new Members Forum.

Join us on Saturday, May 1 at noon ET, for Cycles Magazine Live.

Board Chair and Executive Director, Dr. Richard Smith will talk about the special Earth Day issue and the reprint of one of the most important papers in the history of the Foundation, The Case for Cycles by Founder Edward R. Dewey.

He will be joined by special guest John Goldstone, coauthor of Welcome to the Turbulent Twenties.

Join us live!

• Date: Saturday, May 1
• Time: Noon ET
• Link: YouTube.com/c/FSCTV/live

Click here to read the special Earth Day issue of Cycles Magazine.

Another exceptional issue of Cycles Magazine is out! This special Earth Day issue features a reprint of one of the most important papers in the history of the Foundation, The Case for Cycles by our Founder, Edward R. Dewey. This timeless piece is as relevant today as it was when it was first published in the July 1967 issue of Cycles Magazine.

In this issue, you can also read:

• Harvey Hahn: Exploring Gann’s Cycles-Based Forecasts
• John A. Goldstone and Peter Turchin: Welcome to the ‘Turbulent Twenties’
• Boris Pogos: When Ominous Stock Market Cycles Align

Cycles Magazine is a quarterly publication that showcases the work of Members and cycles researchers from all over the world. It is exciting to see more and more Members submitting their cycles research. We hope you will participate by submitting your research.

Cycles Magazine is our commitment to preserve and sustain the heritage of the FSC and advance Founder Edward R. Dewey’s original vision of the FSC as a not-for-profit institution dedicated to discovering and promoting a new science of cycles.

Click here to learn more about submitting an article for consideration.

Click here to read Cycles Magazine.

In this short but fascinating video, FSC Board Member Andrew Pancholi gives us a cycles lesson about history (or a history lesson about cycles).

Take a look at an 82- to 84-year cycle of disruption, revolution and great change, from the history of world events to Harry and Megan and turmoil in the British Royal Family.

SAVE THE DATE: On Saturday, March 27 at noon EDT, join us live for a very special episode of Cycles TV. Dr. Richard Smith will interview Jay Kaeppel, Senior Research Analyst at Sentiment Trader.

Kaeppel has over 30 years of experience in options, equity, and futures trading, and as a research analyst, trader, and portfolio manager. He has published four books on trading and writes the monthly Explore Your Options column for STOCKS & COMMODITIES.

Date: Saturday, March 27
Time: Noon EDT
Link: YouTube.com/c/FSCTV/live

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ABSTRACT

The importance of analyzing sentiment cycles of active money managers plays a critical role in assessing financial risk. Dominant cycles in the National Association of Active Investment Managers Exposure Index have been identified with high correlation over the past 15 years. The current state of the dominant cycles indicates a possible reversal for U.S. equity markets.

The Importance of Sentiment Cycles

In 1949, investing legend Benjamin Graham eloquently characterized the cyclical nature of financial markets in his book “The Intelligent Investor”:

“The market is a pendulum that forever swings between unsustainable optimism and unjustified pessimism.”

Normally, social mood waxes and wanes positively and negatively. Thus, sentiment waxes and wanes in the form of dynamic cycles. Mood refers to a feeling, emotion, or attitude about something, and, of course, it can have a range of values. Whenever mood is related to corporations or the economy, the character of events will unfold in the related financial assets. Fear and despondency represent one extreme, while thrill and euphoria characterize the other end of the spectrum.

Cycles are the important structure because sentiment does not jump rapidly from one state to another. A change of mood requires time; therefore, sentiment moves in dynamic cycles or waves.The challenge is to spot and predict the extreme turning points observed at market tops (“Maximum Financial Risk” - Euphoria) and at markets lows (“Maximum Financial Opportunity” - Panic).

If you have data sets that provide raw “mood” information related to financial assets on the one hand, and on the other hand have cyclic tools that can decipher and track dominant cycles, we are able to provide supporting market analysis to adjust your active investment risk.

Against this background, a cycle analysis of the NAAIM Exposure Index was performed. The NAAIM Exposure Index represents the average exposure of active investment managers to the U.S. equity markets. A value above 100 indicates leveraged long positions. The raw data of this publicly available index is not predictive in nature. However, the exposure index provides insights into the actual risk management of investment managers. In the case that cycles are found in that dataset, it will allow a prediction of future exposure and risk management efforts of that group.

Our performed cycle analysis for the entire NAAIM dataset revealed two dominant cycles: cycles with a length of 73 and 184 weeks. Both cycles were added to a superposition wave, which simply combines both cycles in terms of their phase, amplitude, and length into one combined wave (Chart 1).

Chart 1: Superposition Composite Cycle (73w + 184w) in the NAAIM Exposure Index, S&P500 Index, Data as of Feb. 1 2021

The composite cycle shown is significant because >90% turning points from the exposure index composite cycle correlate with important market reversals. The composite cycle indicated:

• 2007-2009 17-month bear market during the financial crisis
• 2009 market low
• Short-lived bear market between May and October 2011, which was indicated by the high of the sentiment cycle just before Black Monday on Aug. 8, 2011, when the U.S. was downgraded
• 2014-2015 period began with an indicated sentiment cycle top and resulted in a sideways moving market
• 2016 sentiment cycle low, which indicated the start of a truly remarkable year for financial markets
• Predicting the end of the boom in early 2018, with 2018 being a worse year for financial assets. Since January 2, 2018, the S&P has fallen 8% until year end
• Pointing to the start of the next market upswing beginning in early 2019, indicated by the low of the composite cycle with a gain of +60% to date since the indicated December 2018 composite cycle low

Today, at the time of writing, we have reached the next projected composite cycle high for the NAAIM Exposure Index.

Based on the dominant cycle composite analysis of investment managers’ exposure to the U.S. equity markets shown, the current cycle top and past correlations suggest a trend reversal in U.S. equity markets is imminent.

Lars von Thienen
Mr. von Thienen is founder and CEO of a German-based IT management company. He develops algorithms and software for cycle detection at whentotrade.com and has published two books on cycle analysis. He is a Member of the Board of the Foundation for the Study of Cycles. Appointed by the Minister of Justice, von Thienen has served as a commercial judge for over a decade in Germany. Von Thienen is based in Germany. email: lars[at]cycles.org

 

REFERENCES

• NAAIM Exposure Index: https://www.naaim.org/programs/naaim-exposure-index/
• Cycles App: https://cyclesdev.wpengine.com/

To download Dominant Cycles Report by Lars von Thienen, click here.

 

We are thrilled to announce the release of the second issue of the revived Cycles Magazine, a special 80th Anniversary edition.

Cycles Magazine is a quarterly publication that showcases the work of Members and cycles researchers from all over the world. It is exciting to see Members submitting their cycles research. We hope you will participate by submitting your research.

Cycles Magazine is our commitment to preserve and sustain the heritage of the FSC and advance Founder Edward R. Dewey’s original vision of the FSC as a not-for-profit institution dedicated to discovering and promoting a new science of cycles.

In this issue, read:

• Two articles by Edward R. Dewey: Stock Prices and Space and Stock Prices, Mercury and Space
• An update of Dewey’s articles by Bill Sarubbi: Stock Prices, Mercury and Space in 2021
• Theodore Modis: A Hard-Science Approach to Kondratieff’s Economic Cycle
• Edward Samokhvalov: Geomagnetic Butterfly Pattern
• Andrew Pancholi: Forecasting Long-Term Market Cycles
• Michel Jacquemai: The Curious Cycle of Pestilence
• Lars von Thienen: Asymmetric Business Cycles and Skew Factors

Enjoy! And let us know your thoughts.

Click here to learn more about submitting an article for consideration.

Click here to read Cycles Magazine.