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Author: readyteddy Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 6881  
Subject: Re: strange Date: 10/23/2004 9:12 AM
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It has felt like 94 or 84 this year, except in 94 the Fed pulled the rug out from under the bond market.

Also, in 1994 I believe the actively managed funds out performed the indexes. Nobody had a big year but patience was rewarded and trading produced nothing but commissions. This year, you should be making money but not much. Trading the five week cycle we have had recently hasn't worked that well because signals at the bottoms have been ambiguous (the last cycle added an extra week on the way up and the way down and if it is consistent with the recent moves we should get a trade from the long side possibly as early as Monday), but....

A few thing have not been ambiguous about these smaller cycles for the last six months or so, and they are all bearish as follows.

# The cycles feature lower highs and lower lows

# The cycles are left translated (peak to the left of the middle of the time period. Put another way, the markets are spending more time going down than they are going up. This is usually considered to be bearish but what I find interesting is it has tested the patients of many investors without doing any serious damage to the cvalue of their portfolios. The market is going sideways but seems to be bearish because it is going down most of the time.

# Momentum diverges at the top of these little cycles but not at the bottom. You get a good sell signal but no clear signal to buy the dip for the trading turn.

The above applies only to the indexes. Actively managed portfolios with a value orientation are doing much better. Interestingly, even the Vanguard Index 500 fund is out performing the SPX.

The above are just observations, not predictions. The little wavelets have been sufficiently predictable that they should become widely followed and therefor go away. The smart money would fade the rallies not buy the dips but since most money is long not short this doesn't mean much I don't think. Any surprises producing a sharp movement would seem to be likely to be negative not positive.

BTW, isn't there a larger cycle at work here 1974, 1944, 1914....

Kinda warlike plus or minus a year or two, perhaps?



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