In October 2002 the major market indices (indx, inx and compx) completed a super cycle bottom. This super cycle started at the last super cycle bottom in 1932, and thus lasted 70 years. So it was in EW terms a major event, yet no one even noticed it. Consider this: on July 8, 1932 the DJIA was 41.22; the top occurred on January 14, 2000 at 11,722.98; and the correction to the super cycle ended on October 9, 2002 at 7,286.27. An incredible period of growth as we transited from the industrial revolution to the technology age. In EW terms the advance unfolded in the following way:
cycle 1 1932-1937
cycle 2 1937-1942
cycle 3 1942-1973
cycle 4 1973-1982
cycle 5 1982-2000
super cycle bottom 2002
As you can see, there are five cycles within a supercycle, just as there are five waves (1 – 5) within any upward market movement, whether they be super cycles, cycles, major, minor or minute (all of a lesser and lesser scale within the overall market trend). In declining market movements there are only three waves, usually labeled a-c. Enough of the past! Now for today’s market.
On October 9, 2002 the stock markets started a new beginning. A super cycle that should last another 70 years. The DJIA bottomed at 7,286.27, S&P 500 at 776.76 and the Nasdaq Comp at 1114.11. From here on, into the future this is our point of reference. During the past century the DJIA was the point of reference for the stock market. When someone asked what the market had done, the DJIA was quoted. I do not believe that it the same anymore. This will probably confound people for a quite a while. Typical of the stock market! It appears to me that the Nasdaq Composite has taken center stage in displaying the true market activity. The DJIA is comprised of 30 large capital stocks that have already reached their maturity. The Nasdaq composite contains about 4,000 small to large sized growth stocks. And, the emphasis these days is on growth. In fact, the DJIA has several Nasdaq stocks within it’s index! Regardless, I will follow both the DJIA and the COMPX in these postings. The S&P 500, is kind of an awkward blend of both, and really does not display clear readable waves, even though this is the most heavily traded futures contract of all three indices, and does move the markets minute to minute. The DJIA and COMPX only!
The first major move within a new super cycle is CYCLE ONE, as displayed above in the previous super cycle. This is a multiyear advance taking anywhere from 5 – 21 years. There is no way of determining in advance how long it will last. However, I wouldn’t expect any more than 13 years and no less than 5. So we will be conservative and expect a top in the year 2007. The market will display it’s intentions as it unfolds. Good luck and better investing!