INDU Dow Jones Industrials Weekly Chart Displays 18-Year Secular Cycle

The 18 year cycle, some call it 17.6 years, is one of the most reliable stock cycles. That is why it is extremely odd to see equities continue to rocket higher as the secular bear is coming to a close in 2018.

The secular bear cycle ran from 1964 to 1982. Then the secular bull cycle kicked in from 1982 to 2000 as the massive recession recovered in 1981-1982. The bulls started rallying stocks under republican President Ronald Reagan in the early 1980's after 'The Gipper' broke the back of the US unions. Corporations started axing US workers and instead took the textiles, autos, steel and many other business overseas to take advantage of the slave labor. To this day, the Vietnamese will work all day for a hotdog and a Coke.

Then democrat President Bill 'Slick Willie' Clinton watched stocks move higher on the computer, internet and technology wave in the late 90's. The 1987 crash was a blemish during the secular bull, also the 1990 mini-recession, and a couple late 90's pullbacks. Former Federal Reserve Chairman Greenspan warned that markets are "irrationally exuberant" December 1996 but equities continued higher until the 2000 dotcom bubble top and end to the secular bull cycle.

The 18-year secular bear began in 2000 for the period from 2000 to 2018. It is very normal to have very strong and forceful upside cyclical rallies within the secular bears so the rally from 2003 to 2007 and the rally from 2009 to present is no surprise. However, the massive length of the 9-year rally from March 2009 is a surprise. The central bankers are powerful.

This situation with the 18-year create a serious quandary at this point in time. There is no room remaining in the secular bear except the next 12 months and it likely needs to growl before the secular bear can rest. Another possibility forward is a right translation. In cycle work, the stock market may peak, or bottom, before, or after the cycle predictions. If stocks print the significant level before the expected cycle date, that is deemed as left-translated and if the price move in the underlying takes longer than expected that is called right-translated.

Thus, the 18-year secular cycle may be right-translated going forward and extend into 2019 maybe even 2020. If there was ever a time it would be now since the obscene central banker intervention in markets has destroyed all price discovery, and business and economic cycles, and created bubbles, so if the bear cycle needed an extension it would be now. A year is a long time, however, and the 18-year cycle may not need right-translation. In other words there may be an epic event in store for the stock market this year a la 1987 which will allow the bear to growl to end the 2000-2018 secular bear.

Keystone wrestled with the 18-year cycle quandary versus the uber bullishness in markets when finalizing the 2018 Predictions. The central bankers keep propping up the stock markets and the new tax bill and reduced regulations are expected to create growth. Also promises of an infrastructure bill early this year creates stock market euphoria. This is why over 95% of Wall Street analysts are uber bullish this year and expecting the SPX to climb above 3000 no problemmo. 

Keystone is a technician at heart and cannot turn his back on the 18-year secular cycle. The end of the 18-year secular bear market must be respected as the year plays out. From 2018 to 2036 is a secular bull which is perfect timing for when inflation increases and hyperinflation kicks in in the 2020's. Prices will explode higher although the rampant inflation will hurt your spending power. That will be a new set of problems in the future. 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.