Business Cycle Buy & Hold Strategy

[JTH]

Well, looking at the two plots above, we get the following:

The Juglar and Kitchen cycles are predicting a down wave in the monthly stocks until May 2012; and Armstrong's wave count was off by a year for the secondary up wave in March 2008 (it really started in March 2009), but if it's just a registration error in the date, then his down wave will take us into May 2012.

There are too many similarities between the business cycle and the stock market for me to discount it right now. Back testing of the Biz_Cyc B&H method (100% F in bear markets and 100% I in bull markets as determined by the business cycle) shows a VERY good correlation with a 1200% return since Sept 1991. This compares to a B&H in stocks (40% C, 30% S, 30% I) of 400% since Sept 1991. Avoiding the Bear hits to your portfolio is the key to good long term returns. Amazingly, the LMBF method has returned 500% since Sept 1991 which is better than a straight B&H of stocks mainly because it does avoid losses in an extended bear market.

Time will tell. Still playing it cautious for now and if Armstrong's cycle proves to be off by a year, I will not be going into equities on June 2011, but will wait until June 2012.

I may try to trade, but every time I do, I lose, so maybe not.:notrust:

Thank you for this update, I did enjoy it and do appreciate the amount of back-testing you had to do.

 

[tsptalk]

Agree! Thanks malyla!

 

[malyla]

Today the Business Cycle strategy says go into the market. I have moved the Biz_Cycle tracking account into the I Fund.

I am hesitant to move my tsp account into the market for the reasons I mentioned in the posts below, however, I'm going to risk it and watch. The Kitchen and Juglar cycles say to wait another 12 months, so I'll be managing my account to avoid any large downturns (Will protect the seed corn )

 

[Steadygain]

Malyla,
Having known you over the years and especially considering the lengths by which you have largely remained in F Fund; I'd have to say I am very impressed with this decision.

I know 'my opinion' is meaningless and I don't expect you to feel better knowing how impressed I am. This is such a huge change from a very long ongoing trend that it's like you have a total new and different outlook.

I am in this exact same boat. To me it is far better to consider where we are and where we are most likely going over the long run. I think we'll bounce around with largely side ways stuff - but an Upward Trend will remain for years to come.

Thus the bulk (40% is in I FUND) and 30% is C and S.

 

[malyla]

Just back for a quick observation (I'm buried in research papers and need a break).

I was lurking around and read Coolhand's thread (usually the first thread I click on) when he directed me to the Fearless Forecasters message board and a post with TA analysis that uses planets and number analysis but also uses an analysis performed by timingsolutions.com that convolves two cycles called the Jugler and Kitchen cycles to get a cycle that looks very much like Armstrong's 8.6 year business cycle. I include the picture of the convolved cycles from that post here. Does anyone have information on what these two cycles are, why they are convolved, and how the initial conditions are determined? Seems interesting that the shape is the same, but the dates are different. However, to be fair, Armstrong's cycle could just be curve fitting (I still have problems with some of his explanations and how he picked his initial conditions, although, 2003 and 2007 where amazingly accurate.

Anywho... just curious if anyone on the mb uses this or has research it.

Well, looking at the two plots above, we get the following:

The Juglar and Kitchen cycles are predicting a down wave in the monthly stocks until May 2012; and Armstrong's wave count was off by a year for the secondary up wave in March 2008 (it really started in March 2009), but if it's just a registration error in the date, then his down wave will take us into May 2012.

There are too many similarities between the business cycle and the stock market for me to discount it right now. Back testing of the Biz_Cyc B&H method (100% F in bear markets and 100% I in bull markets as determined by the business cycle) shows a VERY good correlation with a 1200% return since Sept 1991. This compares to a B&H in stocks (40% C, 30% S, 30% I) of 400% since Sept 1991. Avoiding the Bear hits to your portfolio is the key to good long term returns. Amazingly, the LMBF method has returned 500% since Sept 1991 which is better than a straight B&H of stocks mainly because it does avoid losses in an extended bear market.

Time will tell. Still playing it cautious for now and if Armstrong's cycle proves to be off by a year, I will not be going into equities on June 2011, but will wait until June 2012.

I may try to trade, but every time I do, I lose, so maybe not.

Well, Armstrong has a low in June 2011 but that does appear to be off by about a year and Juglar/Kitchen cycles have us at a high in July 2011.... JKcycles seem to be right on target. If you believe these cycles, we are looking for a low in May 2012. Caution is advised going forward.

 

[malyla]

Well, the Juglar/Kitchin cycle is off by a year. After reading some comments on the blogs, I took a quick relook at these Elliott wave cycles.
Caldaro has looked at this Grand Super Cycle wave theory which is predicted to end (badly) in 2014. It's worth the look if you are retiring around that time.

http://caldaro.wordpress.com/2010/02/14/grand-super-cycle-revisited‏/

"The commodity cycle, in itself, is quite interesting. Refer to chart below, bull markets:
1933-1946
1967-1980
2001-2014
Notice there were Cycle wave peaks in the equity markets around the middle of each commodity bull market: 1937, 1973 and 2007. The first peak occurred four years after it began, the next two peaks six years after. Also notice, after the Cycle wave tops stock markets went into a bear market, and then stayed in a trading range until the commodity bull market ended. What followed after that was the extraordinary bull markets of 1949-1967 and 1982-2000. "
"In regard to currencies, during each of the last two commodity booms the USD was officially devalued. FDR did this in 1933 when he devalued the USD/Gold relationship from $20.67/oz to $35.00/oz. Then in 1971, Nixon took the USD off the gold standard completely. This suggests an official devaluation of the USD will likely occur before 2014. "

 

[malyla]

Just saw this on safehaven about the long wave theory (uses Kitchin waves). It's gloom and doom but another cycle theory that has a bottom in mid 2013. Just another caution warning.

[Interestingly, the short term shows an upswing likely around Sept 6-10, which is what Uptrend is predicting as well. Not sure if this from the same data, but interesting...]

http://www.safehaven.com/article/22240/prepare-for-the-global-long-wave-extinction-event

 

[PessOptimist]

Soooo. Some or one of the cycles were off by a year. Some are close. All are "worth a look". Yup, everything is "worth a look".

A system works until it doesn't, then you adjust it to show it did actually work. Then if you are smart, you try to sell it.

 

[malyla]

Soooo. Some or one of the cycles were off by a year. Some are close. All are "worth a look". Yup, everything is "worth a look".

A system works until it doesn't, then you adjust it to show it did actually work. Then if you are smart, you try to sell it.

True. This holds for every system out there, but all knowledge and theory adds to the predictive analysis that allows for some to take decisive actions when the time is right. It's the same thought process and gut feeling that allows you to lay down the pair of aces because you know you are beat or go all in with a suited 3, 4 which leads to a straight flush.

All systems are tools that work during one period or another. Knowledge of all the tools allows one to pick the right one for the time it will work for the market and make some money until it stops working. Ask Ebb&Flow, and Intrepid Timer plus many others about timing, systems, and the market.

Business Cycle, Jaglar, Kitchin and Long Wave theory are tools that have worked in the past but need adjustments to work now. Every system on this message board has been adjusted (Sentiment Survey had adjustments for Bear/Bull market rules, Seven Sentinels was also adjusted a few times)) and some are still being adjusted.

The point is that all knowledge is flawed at times with the market action and adjustments are made to systems or systems are abandon for other systems that are working right now.

If you find a system that works all the time I hope you will share.

 

[malyla]

Some new links for the future of the business cycle peaks.

The Business Cycle and the Future | Armstrong Economics






August 2013 is the next predicted correction within the business cycle. All those retiring in 2018/2019/2020 should take heed. IMHO

 

[alevin]

View attachment 21568



August 2013 is the next predicted correction within the business cycle. All those retiring in 2018/2019/2020 should take heed. IMHO

I've seen that timeframe (2017-2020) identified as the tail end of Secular WINTER from several different sources for some time now. lucky me-that's the timeframe I'd otherwise be looking at for retiring. as is, retirement may come sooner ready or not. If we make it to 2020, things are bound to begin to get better-according to cycle math, that is unless we've become Japan.

 

[malyla]

Some new links for the future of the business cycle peaks.

The Business Cycle and the Future | Armstrong Economics
View attachment 21568
August 2013 is the next predicted correction within the business cycle. All those retiring in 2018/2019/2020 should take heed. IMHO

Sooooo, it's been awhile. The August 2013 to June 2014 mini-correction didn't really happen. There was a minor 3 month blip, but not the year long 10-20% correction. Maybe you could attribute this to Fed manipulation, i.e. QE, but the question is - IS THE BIZ CYCLE STRATEGY INVALID?

I will continue to look at this strategy as another data point in my trading decisions. The peak of this business cycle is scheduled to occur at the end of Sept/early Oct of this year. At that time I will set the Biz Cycle tracker to the G fund.

In time, we will see what the future holds

 

[alevin]

Sooooo, it's been awhile. The August 2013 to June 2014 mini-correction didn't really happen. There was a minor 3 month blip, but not the year long 10-20% correction. Maybe you could attribute this to Fed manipulation, i.e. QE, but the question is - IS THE BIZ CYCLE STRATEGY INVALID?

I will continue to look at this strategy as another data point in my trading decisions. The peak of this business cycle is scheduled to occur at the end of Sept/early Oct of this year. At that time I will set the Biz Cycle tracker to the G fund.

In time, we will see what the future holds

Malyla, it's good to see you posting again. Wow, I'd forgotten all about that biz cycle graphic, I used to look at it pretty regularly a few years ago then lost track of it. thanks for digging that back up again.

 

[malyla]

Sooooo, it's been awhile. The August 2013 to June 2014 mini-correction didn't really happen. There was a minor 3 month blip, but not the year long 10-20% correction. Maybe you could attribute this to Fed manipulation, i.e. QE, but the question is - IS THE BIZ CYCLE STRATEGY INVALID?

I will continue to look at this strategy as another data point in my trading decisions. The peak of this business cycle is scheduled to occur at the end of Sept/early Oct of this year. At that time I will set the Biz Cycle tracker to the G fund.

In time, we will see what the future holds

Staying true to this long term strategy, the turn into a downturn (Bear market) was yesterday (Oct 7). If there was a tracker BizCycle (in I fund since July 2014), I would be moving it to the G fund until late Oct/early Nov of 2016.

Personally, I'm not sure if this strategy is relevant anymore, but I will still update it from time to time in case it proves out as correct. Who knows, it may be the European (ECMWF) meteorological model of the investment world - little heralded, but mostly correct.

 

[Bullitt]

Major top coming in 2024 according to Armstrong charts above.

Anyone follow his work? Been 10 years since I've looked at his stuff.

 

[tsptalk]

Re: Business Cycle Buy & Hold Strategy

Here's another cycle we've talked about before, the Benner Cycle.

The "end" of 2023 is supposed to be a time of market lows. If that was 2022, I'd be more impressed.

More: How The Benner Cycle Predicts 100+ Years of Market Movement