Thursday, August 21, 2008

The odds are starting to skew toward a left translated 4 year cycle

I've mentioned in past updates and posts here on the blog that left translated 4 year cycles tend to be very bearish periods. The 2000-2002 bear was a left translated cycle.

I tend to believe that we saw the last 4 year cycle low in Jan./Mar. We then saw the rally out of that low into the May highs. The decline from that rally made a lower low. That started to suggest that the possibility for a left translated cycle now existed. Now we have the Dow Jones World index breaking down to new lows. That makes the case even stronger for a left translated cycle.

Here's the unpleasant part. Only the 1930 cycle topped out as quickly as this cycle if in fact it has topped. We all know what followed after the June 1930 high. The world sank into the Great Depression. Now I don't know if we are heading into a depression or not. I do think we are probably heading into one very nasty recession. China, you know the great global growth story, land of perpetual double digit growth, is now contemplating a stimulus package. What does that say about the global economy?

Lowry's selling pressure has continued to hit multi year highs as the market has rallied. Big money is selling into this rally just like they sold into the May rally.

I suspect the rest of the global markets are going to follow the world index down and break to new lows strengthening the case for a very bearish next couple of years.