Chapter 17

Judging Cycles and Waves


Bullet Introducing the cycle concept

Bullet Looking to the moon and stars

Bullet Assessing seasonality

Bullet Conjuring magic numbers

Stock and commodity market prices often move in a regular and repetitive manner that looks like a series of ocean waves on the chart. Each wave in a series of waves has a specific height and length, and when those are the same or nearly the same from wave to wave — or waves are consistently proportional to one another — the pattern is called a cycle. Some market price cycles follow economic developments, and some patterns that look like cycles follow some other organizational principle, like the lunar cycle. In some cases, analysts can find a strong correlation with numbers series or a connection to some other cause that is unseen and unproved.

This chapter describes some of the more prominent ideas about waves and cycles developed over the years, with some theories going back centuries. You should suspend disbelief and give the various theories a chance, including the increasingly popular Elliott Wave theory I cover at the ...

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