Wednesday 2 January 2008

Emini Cycles - 2007 and 2008

It's fun and sometimes helpful to start the year looking at long term Emini cycles. I track 6 different long term cycles:

  • 4 year Presidential cycle
  • 8.6 year Martin Armstrong cycle (Princeton Economic Institute)
  • 8, 9, 10 year Benner-Fibonacci cycle
  • 10 year Larry Williams Decennial cycle
  • 11 year Sunspot Activity cycle, and
  • 16, 20, 20 year David Williams / Kondratiev cycle

Not all the cycles signal during any particular year. But what did they say would happen in 2007?

  • The 4 year Presidential cycle said there would be a peak mid-year.
  • Martin Armstrong's 8.6 year cycle said there would be a major peak on 24 February.
  • The Larry Williams Decennial cycle said there would be a peak mid-year, followed by a sharp decline.
  • The David Williams / Kondratiev cycle said there would be a financial panic.

The chart below shows what actually happened to the Emini during 2007.

Emini 2007 Image

Emini 2007

On a continuous contract basis, we ended the year at almost the same level we started (1,485). We had an initial peak at the end of February, almost to the day that Martin Armstrong's cycle predicted! Then rallied to new highs with a peak mid-year - as suggested by the Presidential and Decennial cycles.

This level was then tested and slightly surpassed in early October before sharp falls at the end of the year on sub-prime fears, large banking write-downs and even bank collapses. So the Decennial cycle prediction of a sharp decline was right, but who'd have thought that the David Williams prediction of "financial panic" would come true!

So what about 2008?

  • The 4 year Presidential cycle predicts weakness in the first half of the year, a bottom mid-year and then a recovery.
  • Martin Armstrong's 8.6 year cycle predicts a minor low around 22 March.
  • Larry Williams Decennial cycle predicts a strong year after some initial weakness.
  • The Benner-Fibonacci, Sunspot and David Williams / Kondratiev cycles have no signals during 2008.

All together, it looks like the prediction for 2008 is for weakness until around the end of March and then a strong recovery until the end of the year.

Update: This article was updated in March 2008. Read the updated cycle analysis here.

A note of caution, I don't trade using long term Emini cycles but it's fun to do and I couldn't help myself this year. Good luck with your trading.

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