I should preface this post by recognizing that the following two charts are probably a clear example of data mining – fitting the data to suit your hypothesis. Nonetheless, the results are pretty interesting.
This first chart shows a 131 week cycle. Noted on the chart is that it corresponds with the 1987, 2000 and 2007 market peaks.
This next chart shows a longer-term cycle of 327 weeks. The 1987, 1994 and 2000 peaks line up well in this one.
Currently, both charts are lining up suggesting another peak for the stock market may be imminent. Now there are plenty of lines on both charts that haven’t corresponded with a market peak. But the fact that both of these cycles line up with most of the major peaks of the past 40 years should give them some credence.
Now “The Canadian Technician,” the man responsible for creating them, admits, “It is just a best fit cycle. You slide the cycle around till it best fits the majority of inflection points on the chart.” So this is really guess work at best. Like I said before, a clear case of data mining.
Still, I think everybody would agree that the stock market is a slave to bull and bear cycles. Personally, I believe there is a mathematic relationship between them and this one data point, among many, argues for caution.