A Course in Cycles

Making a Cycle Analysis

 A Course in Cycles

An Introduction to Cycles

Modern Cycle Analysis

Cycle Principles

Hurst Principles

Making and Using an Analysis

Cycle Techniques

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 A Course in Cycles Section 1

An Introduction to Cycles

Modern Cycle Analysis

Cycle Principles

Hurst Principles

Making and Using an Analysis

Cycle Techniques

WWW.CYCLES.CC
 What Is a Cycle

Cycles and the cycle model

Rhythms, periodicity and fluctuations

The nature of the cosmos and cycles

The nature of reality is for everything to revolve around a

center and return again and again to similar conditions such as
the planets and galaxies

Change and growth and cycles

Cycle Model Terminology

Trendline

Period
Cycle Model Terminology

Phase Trendline
Cycle Model Terminology

Peak
Trendline

Amplitude

Trough
Cycle Model Terminology

Peak
Phase Trendline

Amplitude

Trough
Period
 How It All Began

The ancient world had very long histories and

traditions of observation

Cycles began with the Ancient Indians, Babylonians,

Persians and Egyptians

Long term data reflects the history of human activity

History repeats itself but it does not duplicate itself

Physical observations to mathematical methods

Nile River Flood Stages

54-Year Cycle
Long Term Data Shows How the
Availability of Money Affects Civilizations
 A Course in Cycles Section 2

An Introduction to Cycles

Modern Cycle Analysis

Cycle Principles

Hurst Principles

Making and Using an Analysis

Cycle Techniques

WWW.CYCLES.CC
 The Discovery of Cycles
in the 19th Century
The shift in economic systems

How it began
Observation of commercial crises and bubbles ranging from tulip prices
in Europe to trading in the South Seas to agricultural values along the
Mississippi River.

The beginnings of economics

Adam Smith, Ricardo and the physiocrats

Sismondi and Marx

 The Discovery of Fourier
`
First Published in 1807
The Fourier Series

Multiplying both sides by, and then

integrating from y = -1 to y = +1 yields

Jean Baptiste Joseph Fourier (17681830)

Joseph Fourier, Mmoire sur la propagation de la chaleur dans les corps solides, pp. 218--219.[1]

The series was designed to decompose a time series into component parts. It is
widely used in science and statistics and is one of the greatest mathematical
discoveries in the last 200 years. There would be no science of cycles without it.
 Modern Approach to Finding Cycles

By observation

By measuring charts

By mathematical methods

Testing cycles

Hold outs

Outcome
 Computer Led Advances
in Fourier Analysis

Developments in the Fourier Series

Harmonic Analysis
Statistical Spectral Analysis and the
Power Spectrum

Fast Fourier Transforms

Cooley-Tukey 1965
Blackman-Tukey

Maximum Entropy Spectral Analysis

Burg 1978
 The Power Spectrum

10000

Power Spectrum in Bonds

9000

8000

7000

6000

5000

4000

3000

2000

1000

0
8 18 28 38 48 58 68 78 88 98 108 118 128 138 148 158 168 178 188 198 208 218 228 238
Periodgram
The Cycle Model and
the Harmonic Pattern
 A Course in Cycles Section 3

An Introduction to Cycles

Modern Cycle Analysis

Cycle Principles

Hurst Principles

Making and Using an Analysis

Cycle Techniques

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 The Search for Causes
The Development of Cycle Theories
William Herschel weather and sunspots
The theories of W. Stanley Jeavons
Clement Juglars 9 to 12 year cycle
Professor Moores 8 year cycle
Sir William H. Beveridge work in wheat prices
The Kuznets cycle
The Kondratieff long wave
Kitchin cycle
The Schumpeterian system
Ellsworth Huntington
Wheelers drought clock
Planetary cycles
 Cycle Typology

Not all cycles are the same

Physical cycles

Natural cycles

Cycles in human activity

Physical Cycles
Natural Cycles
Cycles in Human Activity
 The Importance of Data

Understanding the nature of the data

Changes in the nature of data
Data series changes

Choosing the kind of data, futures, cash or

averages of daily prices

Choosing the length of the data

Choosing the data compression from intraday to yearly

The role of detrending

Visual inspection of the data

Composition of Data
 Composition of a Time Series

Jim Hursts estimate

Fundamentals and trend 75%
Cycles 23%
Random factors 2%

Foundations estimate
Fundamentals and trend 73%
Cycles 22%
Random factors 5%

Stock price trend accounts for 92% of all price changes

Bond yields cycles account for 89% of all price changes
 How Much Data do I Analyze

More is not always better

Do not look for cycles greater than 200 in a data series -

compress the data for longer cycles

Phase versus period

For the best phase about 1800-2000

For the most stable period about 3000

Closes or averages for monthly data

 Transformations and Interpolation

Logs

Rate of Change in economic data

Rate of Change in yearly data

Complete detrending,
departures from a moving average,
method of least squares

The effects of the moving average

 The Issue of Trend

Complete detrending is it necessary?

The role of departures from a moving average

The difference of trading and science

You cant trade departures

Partial detrending with logs

The use of the Rate of Change
Other methods
Least squares
First Differences

Tukey Smoothing
Dow Jones Departures From a
40 Data Point Moving Average
 A Course in Cycles Section 4

An Introduction to Cycles

Modern Cycle Analysis

Cycle Principles

Hurst Principles

Making and Using an Analysis

Cycle Techniques

WWW.CYCLES.CC
 Hurst Principles

Summation or Synthesis Principle

Commonality Principle

Variation Principle

Nominality Principle

Proportionality Principle

Cycle Phase Reset J. M. Hurst

Summation of Two Cycles
Summation
 Problem of the Summation Principle

Small and large cycles share the same highs and lows

Curve fitting is too likely if all cycles are used

When you decompose all harmonics, then re-sum them,

you should get the same plot

55% of the time all cycles will be fine, and those odds are
not good enough

Summation Principle with Dominant Cycles, not all cycles

 Nominal Cycle Model in Stocks

Years Months Weeks Market Days

936
18 216
468
9 108
54 234
4.5
1.5 18 78 400
9 39 200

20 100
10 50
5 25
12.50

6
3
 The Controversy over Inversions

A cycle Inversion or just wrong?

Timing right, direction wrong

Buying and selling cycle lows and

highs is profitable 65% of the time

Inversions account for 13%-15% more turns

Cycles tend to pick 78%-82% of the highs and lows

 How Inversions Work

The cycle model and Inversions

Physical cycles and Inversions

Natural cycles have some Inversions

Cycles in human activity

Cycles invert about 12-15% of the time

65% of cycle turns with good Bartels are profitable

The longer the cycle, the fewer the inversions

Cycles in Human Activity
2 Inversions in 16 turns
 The Principle of Phase Adjustment

The controversy

Curve fitting and the math of the phase

The Principle of Nominality

The Principle of Variability

Total Phase adjustment

Partial Phase Adjustment

The high-low interval

 A Course in Cycles Section 5

An Introduction to Cycles

Modern Cycle Analysis

Cycle Principles

Hurst Principles

Making and Using an Analysis

Cycle Techniques

WWW.CYCLES.CC
 Using Cycles

Cycle Projections versus trading with cycles

The use and role of Cycle Projections

Cycle Projections are forecasts

The problem of decomposition and Inversions

Trading is decision making

Use individual Dominant Cycles for trading

 Steps in a Cycle Analysis

1. Get the cycle context including contrary series

2. Choose the data for the analysis
3. Choose the length of the data
4. Examine the data
5. Learn the history of the data
6. Choose your time frame
7. Detrend and Interpolate the data
8. Analyze the next higher compression to find Dominant Cycles
9. Analyze the data
10. Experiment with holdouts
11. Make a cycle projection
12. Set up a trade with Trend, Timing and Beat Cycles
13. Apply price techniques
14. Use technical and other tools for the final setup
A Cycle Projection
 Dominant Cycles

Dominant Cycles demand that you determine your time frame

Use Nominal Cycles

How to determine a Dominant Cycle

Which makes more money?

How long do you stay in a trade?

Risk Management and Time Periods

K-Ratios
 Cycle Trading Typology

The cycle context the next higher compression, i.e.,

weekly is the context for daily, as monthly is for weekly

Trend Cycles

Timing Cycles

Beat Cycles
Is this a Dominant Cycle?
The Shorter Cycle is Dominant
Trend, Timing and Beat Cycles
 A Course in Cycles Section 6

An Introduction to Cycles

Modern Cycle Analysis

Cycle Principles

Hurst Principles

Making and Using an Analysis

Cycle Techniques

WWW.CYCLES.CC
 Cycle Techniques

Oscillator / Cycle Combinations

Trading Cycle Typology & Nominalization

Cycle Envelopes

Half Cycle Projections

Price Targeting

Fibonacci Retracements

Regression Channels

Seasonal Tendencies
Oscillator Cycle Combinations
v
Concept of Envelopes
v
Half Cycle Projections
Price Techniques
Seasonal Study
 Integrating an Analysis

Once cycles are found the real work begins

Understanding the relationships of data series to one another

Understanding sameness and difference

Create what-if scenarios

Develop sign posts for projection

Develop contrary indicators and signs

Cycle Synchronies
The 54-year Cycle
 The General Plan of an Analysis

Get the cycle context

Decide about your time frame

Get the Trend Cycle from the compression higher than

the data you wish to analyze

Find your cycles

Review the tools and execute

Techsignal: a Complete Cyclic Toolbox
 THANK YOU
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