Monday, December 9, 2013

The bigGER picture

To round things out a bit, we decided to take a Felix Baumgartner peak at the long-term equity market cycle. Secular lows were determined and normalized by performance (SPX) and the momentum lows as expressed by the cycles respective RSI and stochastic oscillators. Because this was such a long-term study, we utilized a quarterly scale for this big-ger picture view. 

Based on these criteria, the secular lows were determined as: Q2 1932, Q3 1974 and Q1 2009.

From a performance perspective, both of the long-term cycles (32'-73' and 74'-07') delivered similar returns (~ 2600% & ~2300%) - granted the former was approximately eight years longer. From a qualitative perspective, one could argue the 32'-73' secular bull actually delivered much smoother and superior returns, compared to the latter cycle that included the collateral damages of the Tech-Bubble bursting. 

Click to enlarge images


Should the current market follow in the performance cadence of the 1980 breakout, the market is likely close to making an interim high - before retesting the previous resistance levels from earlier in the year. 
To reconcile this perspective with long-term support which currently sits ~ 1600, a consolidating range for 2014 above the Meridian would present participants with a frustrating environment for both bulls and bears alike. Food for thought.  
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*  All stock chart data originally sourced and courtesy of www.stockcharts.com 
*  Subsequent overlays and renderings completed by Market Anthropology