The Calm Before the next Wave
Long-Term Global Market Update
Global equity markets have been in a process of topping since late October 2021. Now the long-term and short-term cycles have synced up to unleash the next major wave.
Let's briefly recap the main analyses done in various public channels:
(1) Long-term dominat cycles rolled to the bearish camp
Weekly cycle analysis predicted a major market shift to begin in October. The shift from a bullish to a bearish cycle period. The underlying time-period of this composite are marked in red and green. Indicating to expect a longer period of negative cyclic energy. It is clearly seen how these market phases performed in the past 20 years.
You can review the live analysis here (Minute 8-15 in the video):
(2) Baltic Dry Index Top as leading economic cycle projection
The September cycle analysis of the Baltic Dry Index, a leading indicator of economic activity, predicted an impending crash in ocean freight rates at the time of the analysis. Just two weeks later, the Baltic Dry Index plummeted from 5600 to 2000. A declining BDI can be taken as a leading indicator of global economic activity.
Link to live analysis: Market Cycles Report: Sept. 20, 2021 - Baltic Dry Index - YouTube
Outcome of the BDI top prediction after the fact:
(3) Weekly financial stress index cycles pointeda market top end of 2021
Last but not least, the cycle prediction on the Financial Stress Index warned us in October to expect the positive market sentiment to come to an end at the end of 2021.
The dominant cycle on the weekly dataset showed us that the sentiment cycles would need some more time before they are expected to switch at the end of December 2021. The raw data is publised by the Federal Reserve Bank of St. Louis.
You can review the analysis of the Financial Stress Index, also done live and in our public channel, here:
These priovious three analyses should be viewed as long-term projections: A change of three dominant weekly cycles, from an uptrend to a downtrend, requires a transition period before it shows up in daily price action. The now confirmed prediction of falling freight rates supports the downward projection of the weekly cycles as the beginning of a possible transition into a bearish cycle phase in the overall markets which has started at the end of October. Finally the Financial Stress Index cycle showed us that this would come into alignment at the beginning of 2022.
Since the time of this October 2021 analysis, markets have been in a "limbo" state: The markets have failed to complete another broad-based breakout to the upside or a convincing breakout to the downside.
The purpose of me writing this update today is because the daily cycles have now also moved into the bearish camp since early January, confirming a potential market top.
It is a very rare situation when cycles form a perfect match. The October-December period was the calm before the wave that now seems to be approaching the markets. And we will see if these cycles will be able to unleash their full power as they align.
Current daily S&P500 cycles form a topping cycle pattern:
Please review the above mentioned analysis. All four
weekly dominant cycles,
confirmed falling BDI index cycle projection,
Financial Stress Index cycles and
daily S&P5000 price cycles rolling over now
make up the complete picture.
All the best, regards,
Lars von Thienen