From Peter Eliades' Stock Market Cycles Website:
stockmarketcycles.com
This was apparently written a week or two ago.
MARKET CRASHES
Market crashes are rare and tend to be generational or longer in
terms of their frequency. In 1962, the DJIA declined 27.9% on an
intra-day basis between March 16 and June 25. At the time, many
referred to it as a crash. Our reference to a "crash" is to an event
far more dramatic and more condensed than that. As a general rule,
crash panics cause declines of 25 to 50% or more within a 2-6 week
period. The most obvious example in the U.S. market are the crashes
of 1929 and 1987.
Many consider it foolhardy to attempt to predict a crash. Others
believe that all crash predictions are simply devices to seek
attention. We agree to the extent that a prediction of a typically
generational event should be almost impossible, and would tend to
attract attention, especially a crash prediction from someone who has
had any prior success predicting market trends. That much having been
said, we are going to tell you why we believe there is a real chance
to see a crash in the near future. The most important requirement for
a true crash is a market at historic overvaluation levels. In many
ways, the current market is more overvalued than any other in our
history. The rest of this section is an excerpt from our newsletter
written on June 22, explaining why we see the real potential of a
market crash over the next few months and some rather precise time
periods for the timing of such an event, should it occur.
"There is little doubt that we are fast approaching one of the most
important cyclic time periods in a long, long time. The period
between July 20 and July 29 is scheduled to be a bell ringing cyclic
period. Over the past several months, we have noted that our own 10
plus year cycle discovery was due to see the second of two peaks
resolve on July 29, plus or minus three weeks. We have also noted
that both Chris Carolan of Carolan92s Spiral Calendar Research
(800-336-1618) and Martin Armstrong of Princeton Economics
(609-987-0600) are looking for one of the most important cyclic turns
of the decade to occur between July 20 (Armstrong) and July 28
(Carolan). That is not all, however. The Bradley Model, which has
been popularized recently by the Gerry Favors Analysis newsletter
(614-868-1053), is pointing to July 20 as a major market turn. In
fact, the Bradley long-term model shows July 20 as the high for the
year. Be aware that turning points are more important on the Bradley
than magnitude, but a surprising number of times, this indicator that
can be calculated years and decades ahead of time, has pinpointed
important tops and bottoms in the market. In 1987, the Bradley high
for the year was August 23, just two days away from the most
important top of the past decade. In 1996, the Bradley high for the
year was May 24, one day after the Dow topped out prior to a 10%
decline (17% for the OTC Composite). Last year, the low for the year
on the Bradley was October 28. After the August 7, 1997 all time Dow
high, the low for the rest of the year was seen on exactly October
28. We will not go into details on the Bradley Model, but it is
calculated on the basis of angular relationships or aspects between
planets. It is truly amazing to us that there are four completely
different disciplines that argue for the possibility of a major trend
change in the stock market between July 20 and July 29.
Let92s use that as a starting point and have some fun. Let92s assume
that an important market top will be seen between July 20-29. Our
current opinion is that if it does mark a top of significance, it
will probably be a lower top on the Dow than the one seen already in
May (May 4 intra-day and May 13 close). That is unimportant, however.
It is what might happen next that is significant. If we take some
clever and fascinating research from two market students and put them
together and include an assumption stated by John Kenneth Gailbraith
that "the speculative episode ends, not with a whimper, but with a
bang," we can paint a fascinating potential picture.
[IMAGE]Chart[12]
We seldom use much newsletter space for the ideas of others, but the
theories we are about to present fit together so well, we believe you
will find them as interesting as we do. The two researchers are Steve
Puetz (pronounced "pits") and Chris Carolan. Chris just won the 1998
Charles H. Dow Award for his original research and the complete
article is offered on his web page at www.calendarresearch.com. The
research by Puetz was first noted in our October 10, 1995 newsletter.
Here is what we wrote:
"Puetz attempted to discover if eclipses and market crashes were
somehow connected.
Without discussing our own opinion on the potential connection
between astronomical configurations and market timing, let92s simply
relate to you the basic findings discussed by Puetz. He emphasized
that he is not contending that full moons close to solar eclipses
cause market crashes. But he does conclude that a full moon in
general and a lunar full moon close to solar eclipses, in particular,
seem to be the triggering device that allows for the rapid
transformation of investor psychology from manic greed to paranoia.
He asks what the odds are that eight of the greatest market crashes
in history would accidentally fall within a time period of six days
before to three days after a full moon that occurred within six weeks
of a solar eclipse? His answer is that for all eight crashes to
accidentally fall within the required intervals would be .23 raised
to the eighth power 96less than one chance in 127,000.
". . .Puetz) used eight previous crashes in various markets from the
Holland Tulip Mania in 1637 through the Tokyo crash in 1990. He noted
that market crashes tend to be lumped near the full moons that are
also lunar eclipses. In fact, he states, the greatest number of
crashes start after the first full moon after a solar eclipse 96when
that full moon is also a lunar eclipse . . .Once the panic starts,
Puetz notes, it generally lasts from two to four weeks. The tendency
has been for the markets to peak a few days ahead of the full moon,
move flat to slightly lower --waiting for the full moon to pass. Then
on the day of the full moon or slightly after, the brunt of the crash
hits the marketplace."
We also know that secondary tops prior to crashes tend to occur 38
calendar days after the primary top. In 1929, it was 38 days from
September 3 to October 11. In 1987 it was 38 days from August 25 to
October 2. In Tokyo in 1989-90 it was 39 days from December 29, 1989
to February 6, 1990.
If we use July 25 as a mid-point of the four cycles discussed above,
then assume it will represent some kind of market high, we can then
add 38 calendar days to that date and arrive at Tuesday, September 1
for a potential secondary top just before a potential crash begins.
Chris Carolan92s new research paper concludes that market panics have
a strong tendency to occur on the 27th and 28th days of the sixth or
seventh lunar month where the annual lunar calendar labels the date
of the first new moon following the spring equinox as month on, day
one etc. In 1998, that day was March 20. The date of the second new
moon after the spring equinox is month two, day one etc. This year
the dates of the 27th and 28th days of the sixth and seventh lunar
months are September 17 and 18 and October 16 and 17. With a few more
bits of information, we can put together a fascinating scenario.
There are ony two lunar eclipses remaining in 1998. They occur on
August 8 and September 6. There is only one solar eclipse remaining
in 1998. It occurs on August 21-22, 1998. Remember the research from
Puetz above that "the greatest number of crashes start after the
first full moon after a solar eclipse 96when that full moon is also a
lunar eclipse." Do you find it as childishly fascinating as we do
that these pieces of evidence, again from at least three separate
areas of research point so compellingly to the same time period for a
potential crash, if one is to occur. It is difficult to avoid the
conclusion that there is a very real possibility of some kind of
market top around September 1-8, leading to a precipitous decline
that culminates in a panic crash on September 17-18.
There is one more trick up our sleeve. There has been a tendency for
crashes to occur 55 calendar days after final tops are registered. If
we assume a crash on September 17, based on Carolan92s research, then
count back 55 calendar days, we arrive at July 24 as a date for a
final top 96right in the middle of our cycle target area!
The reader should not assume that either Puetz or Carolan is
predicting a crash this fall. Their work simply points to periods
where panics have occurred in the past based on celestial
observations. There is nothing in the work of Carolan or Puetz that
points specifically to 1998 as a possible crash year. On the other
hand, when you are dealing with what many veteran observers would
agree is the most overvalued market in history, perhaps the greatest
speculative episode in history, it is wise to remember the sage
admonition of Mr. Gailbraith. The speculative episode ends, not with
a whimper, but with a bang.
Copyright co 1998 Stockmarket Cycles
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