Cycles

The term Cycle is defined as a repeating, periodic disturbance which moves through a medium from one location to another.  Stock market movement can be imagined as a series of complex waveforms.

Cycle

The term Cycle is defined as a repeating, periodicdisturbance which moves through a medium from one location to another.  Stock market movement can be imagined as a series of complex waveforms, where market movement is actually a summed total of the individual oscillations.


Cycle Identification

Many stock-related cycles have been identified, from very short term to decades in length.  Some of these cycles are listed below.

  • Kondratiev   Cycle:  50-60 year cycle of expansion/stagnation/recession.  Note:  the most recent cycle appears to be stretched out by monetary policy.
  • Presidential   Cycle:  4 year cycle based on the U.S. presidential term.
  • Yearly (Seasonal) Cycles:
    • Halloween Indicator: Sell in May and Go away
    • Santa Claus Rally:  End-of-Year Rally
    • January Effect:  Small Cap performance in January
    • End of Month Effect:  Stocks tend to exhibit end-of-month strength.
    • Day of Week:   First day of week tends to be bullish;  Friday tends to be bearish

    Spectrum analysis is often used to detect cycles.  For short term technical analysis, oscillators such as the Stochastic Oscillator tend to perform well during cyclic activity.

    Related Terms