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Benner Cycle: The 18-Year Cycle Of Secular Stock Markets

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August 21, 2010 – Comments (17)

This is a great post by Trader's Narrative. I am a huge fan of cycle theory, so this one was right up my alley. Take a look at the attached picture (the card was originally made in 1872). Good stuff :)

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From: http://www.tradersnarrative.com/benner-cycle-the-18-year-cycle-of-secular-stock-markets-4593.html

Recently Barry shared an old card from 1897 that a reader had sent him (see below). Another reader identified the cycle within it as the Benner Cycle or the 54 year cycle of stock market returns. This simple pattern shows that major market tops form in a recurring cycle of 16, 18 and 20 years concomitantly. If you add those three numbers, you get 54 years. The average then is an 18 year cycle (54 divided by 3).

17 Comments – Post Your Own

#1) On August 21, 2010 at 1:38 PM, Starfirenv (< 20) wrote:

Binve- Interesting, there is an HST algorythm called Power Line that looks just like this. It's a four step repeater used on the NASDAQ. It's half way down on the scroll bar.
http://www.nanex.net/FlashCrash/CCircleDay.html
It runs 400 quotes/sec. Benner based maybe? Usual +1 Thanks

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#2) On August 21, 2010 at 2:13 PM, binve (< 20) wrote:

Starfirenv,

Thanks for the link! I had not seen that before. You know what this looks like, the waves are all sawtooth waves and simply oscillating repeating wave forms. I bet they are sending out waves that can be easily modeled with a Fourier Series (and consequently extracted with a FFT) so that they have baseline "noise" that can be easily filtered out. Then the other market activity will be the signals in their signal to noise extraction filter. I have no idea how they are using all of this (extraction, feedback, and then placing buy and sell orders), but it seems like the mechanism.

I bet each quant firm has their own waveform (so they can filter it back out as noise). I wonder if they have accounted for what happens if another quant is using the same waveform and they timing happens to line up just right (constructive / destructive interference in their signal to noise algo). If they are basing all of their buy / sell algos based on a clean feedback signal, then there could easily be situations in the market where that breaks down, either accidentally or intentionally (quant warefare).

I wonder if the quants employ signal engineers? (I am not one, just a humble mechanical engineer who is somewhat familiar with the topic). If not, that would seem like a wise investment...

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#3) On August 21, 2010 at 3:13 PM, Starfirenv (< 20) wrote:

B-Man, Sounds like a killer video game, "Quant Warfare". Find a sharp young programmer and market to all these "kids" that want to retire at 30. A budy of mine developed a game, played live online world wide in real time 24/7 and when they run out of "ammo" he sells more- automated via CC. Late nite is the busy time. He wakes up and checks how much he made every day. Talk about a rev stream. HMMMM. I need to make a call... AFTER I get this old Pontiac running (must stay focused, must stay focused must.....). It's a '65 LeMans w/49k orig. My new girlfriend.

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#4) On August 21, 2010 at 4:20 PM, HarryCarysGhost (99.74) wrote:

Starfire- In the words of Keanua Reeves, Whoa!

Looking at those charts made me feel like I was in the matrix.

Obviously I'm not a chartist but that looks like price manipulation to me.

and to binve " Scruffy believes in this company"...  ; ) 

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#5) On August 21, 2010 at 4:31 PM, binve (< 20) wrote:

Starfirenv ,

>>Sounds like a killer video game, "Quant Warfare".

LOL! Yep :) Except then all of us are the bystanders like in GTA :(

>> Talk about a rev stream.

That is just crazy.

>>AFTER I get this old Pontiac running (must stay focused, must stay focused must.....). It's a '65 LeMans w/49k orig. My new girlfriend.

Nice bro! That is an awesome car. My brother fixed up a 64 Star Chief a few years ago. That was a great car. Treat your girl right :)..

msftgev,

"Scruffy's gonna die the way he lived." ... :).

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#6) On August 21, 2010 at 4:40 PM, djshagggyd (69.21) wrote:

Binve-

Very interesting! Thanks for posting. Benner seems like a very interesting and intelligent character.

msftgev-

Wild Stallions has always been one of my favorite bands... haha! I once recorded Keanua's real-life band at a studio in Chicago. I think they were called "Dogstar" or something like that... funny name :) He was a nice guy.

Have a nice weekend everyone!

~justin

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#7) On August 21, 2010 at 4:52 PM, catoismymotor (36.11) wrote:

Of all the charts I have seen this one captures my attention due to its general accuracy and age. With all the peaks and valleys the investor that chooses to DCA should do well.

binve, thanks for the chart.

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#8) On August 21, 2010 at 5:40 PM, binve (< 20) wrote:

djshagggyd ,

No problem!

catoismymotor ,

Hey cato, definitely!

>>With all the peaks and valleys the investor that chooses to DCA should do well.

Exactly. For LTBH types you can choose your spots to be very bullish, and I think we will get lower prices and an excellent value spot in a few years (which will make even me bullish :) ). Thanks!..

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#9) On August 21, 2010 at 7:20 PM, bothisellhigher (29.14) wrote:

You are all missing the fact that this is actually the work of  an advanced scout communicating with the mothership via an interesting looking (to us) algorithim...letting the "other" know that we can be had for a dime and think everything we see is really just a game. Earthlings should be no problem at all.

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#10) On August 21, 2010 at 11:56 PM, uclayoda87 (29.46) wrote:

Sounds like Group Theory to me, as I stare at my Rubik's Cube.

It took me almost 30 years to try to forget this stuff and you had to bring it back!

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#11) On August 22, 2010 at 1:27 AM, kstarich (30.66) wrote:

Binve

You amaze me where you find all these charts.  I do see a set up in Oct that looks simular to May 6 flash crash, the date is Oct 4.  In fact the whole month does not look good. 

kstar

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#12) On August 22, 2010 at 9:23 AM, binve (< 20) wrote:

bothisellhigher,

Klaatu barada nikto ... :)

uclayoda87,

Indeed! Sorry for the memories. But besides this 18 year cycle, there are other longer sentiment cycles at work too (which which tend to guide the relative peaks and troughs of the 18 year cycle). Here is a good writeup that integrates K-waves (which is the 40 year cycle) with current sentiment: http://www.gold-eagle.com/gold_digest_08/droke070709.html

kstarich ,

Hey kstar! LOL! I just tend to be a pretty prolific reader :)

>>I do see a set up in Oct that looks simular to May 6 flash crash, the date is Oct 4.  In fact the whole month does not look good. 

I totally agree. If the count that I think most likely to occur pans out, then we will be in the midst of Minor 3 of Int 1 down during that time. See this post: http://marketthoughtsandanalysis.blogspot.com/2010/08/where-we-are-long-count-and-some.html..

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#13) On August 22, 2010 at 9:38 AM, scruffy4life (77.18) wrote:

Binve I looked at all the charts, but could you explain it in a way scruffy could understand. Looks like 2012 is the buying opportunity your looking for. Am I correct in saying this.

Now I gotta go make some picks so I can get a scruffy avatar ;)

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#14) On August 22, 2010 at 10:05 AM, binve (< 20) wrote:

scruffy4life ,

Awesome name! :)

>>Looks like 2012 is the buying opportunity your looking for.

That is precisely what I am saying. I think all of the macro problems are coming to a head. I think we have been in a secular bear market since 2000 and the 2003-2007 and 2009-2010 rallies were just cyclical bulls within a secular bear. If you look at these in inflation adjusted terms, that becomes crystal clear: http://dshort.com/articles/2010/mega-bear-2000.html

So if things play out like I think they will, then 2012 will be my buying opportunity. This will not necessarily be the absolute bottom, but I think the long term risk/reward will highly favor going long there (and given the macro problems I think risk/reward stinks for being long). In particular, I think quality dividend yielders will be the buy of the century then (I think growth stocks may take a little longer to bottom, but we will see).

And speaking of dividends and a long term macro and fundamental view, I wrote this post at the beginning of the year. Another sign to look for will be when the dividend yield approaches the P/E (actual TTM, not BS analyst estimates) for the S&P: Is the Market Fairly Valued? Did the Market Achieve Any Meaningful Bottom Back in March?

My $0.02 at any rate

>>Now I gotta go make some picks so I can get a scruffy avatar ;)

Awesome! :)..

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#15) On August 22, 2010 at 2:04 PM, blesto (31.55) wrote:

binve & scruffy4life, Not to mention that 2015 may be a time to let go of some shares or properties.

A very eerie card binve! I saved it to my computer to "watch it closely".   (:

 

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#16) On August 22, 2010 at 2:29 PM, binve (< 20) wrote:

blesto,

Hey man!

>>I saved it to my computer to "watch it closely".

Same here :)..

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#17) On March 12, 2011 at 7:16 PM, HarryCarysGhost (99.74) wrote:

Lets show Scruffy some love.

I love it when a simple plan comes to fruition : )

Still watching the Benner Cycle.

Wait for it....

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