Thursday, March 27, 2014

INDU Dow Jones Industrials Weekly Chart Long-Term 18-Year Stock Cycle

The long-term chart highlights the most reliable stock cycle, the 18-year. The secular bull ran into the mid-1960's. Then the secular bear took over as the US moved through the flower child years, and Vietnam mess, the gasoline crisis and the shaky high-inflation years with President Jimmy Carter. In 1982 Ronald Reagan took office as President and broke the airline unions. Once the door to lower wages was opened, companies became highly competitive and the economy and stocks soared into the dotcom bubble in 2000. In December 1996, Chairman Greenspan commented on "irrational exuberance" but markets continued higher for four more years before the 2000 crash.

The year 2000 ushered in the 18-year secular bear but by the looks of it, 14 years in, the stock market is at new all-time highs. So much for the most reliable cycle? Probably not. Note that even in the 1964-1982 secular bear stocks maintained a flat profile rather than dropping dramatically. A similar finish in 2018 would place the Dow at 9000-11000. Note the expansion pattern in play with price now teasing the upper rail. A drop from here would actually target 5500-6500 about four years out.

It is common to have strong cyclical rallies inside secular bears. Likewise, cyclical bears inside secular bulls. The 1987 crash only appears like a blip during the robust secular bull cycle from 1982 to 2000. Interesting times are ahead for the next few years. The 2018-2036 secular bull makes a lot of sense since inflation and/or hyper inflation will be hitting due to the Fed and other central bankers dirty deeds and all assets will be inflating. A loaf of bread will be five bucks, a gallon of gasoline ten bucks, the Dow will be running through 20K on its way to 30K and the SPX will be over 2K on the way to 3K. Unfortunately, the dollar will be losing value so the overall result is running in place.

The current 2000-2018 secular bear remains a mystery since the obvious expectation is far lower equities. There are four years remaining in this current 18-year secular bear stock market cycle and this most reliable cycle says watch your wallet moving forward; it may be a nasty four year ride. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.