Initially written: 03/1987 and Updated: 10/25/11
This is my 2th Article in a series I call: "Why Most Investors and Nearly All Traders Lose Money." It is also expanded in one of the chapters I have in my (un-published) book. The title of my book is: Decoding Wall Street.
By the Law of Periodical Repetition, everything which has happened once must happen again, and again, and again -- and not capriciously, but at regular periods, and each thing in its own period, not another's, and each obeying its own law... The same Nature which delights in periodical repetition in the sky is the Nature which orders the affairs of the earth. Let us not underrate the value of that hint. -- Mark Twain.
My SHB Cycle is one of the Three Pillars of My Methodology of "Investing Wisely". (please see my Personal / Private Blog -- currently inactive) http://investingwisely-rotation.blogspot.com/?spref=tw
A definition of Cycle Analysis: Cycle Analysis is a form of Technical Analysis involving the process of making investment decisions based on the different stages or cycles that all General Market Indices, Sectors, Industries and Securities go through over time. These stages / cycles are clearly defined in the animated graphic below.
The stage or cycle will always be Bullish or Bearish. Taking investment positions, depends on the specific characteristics of those collective and individual Indices, Sectors, Industry Groups and Securities in any given time frame.
My SHB Cycle:
Knowing for sure where you are on My SHB Cycle is easy. It is designed for the Short (1- 3 months) and Intermediate-Term (3 - 9 months) - Bull Markets (Buying) and Bear Markets (Shorting). This knowledge is an essential and vital key to your having consistent annual profits.
Offering a Warning: Taking Bullish positions when the general market, sectors, industries and company is over-valued, over- bought, hyper-bullish is historically and factually not prudent or "Investing Wisely." It is just restricting your the prospect for profit and practically asking for a loss. Saying it another way - taking positions when the security is in the late, very late or avoid stage of the SHB Cycle is just like saying: "This security will defy all the known laws of sound investment management." I hope I am getting your attention and if not you are in a world of hurt! Remember, I am here to help.
Obviously, the opposite is true if you are taking Bearish positions.
Trying to communicate the complexities of this important "Pillar" of my analytics is, I'm sure impossible, I have tried many times. This is one more of many drafts, and I still do not think I am doing you justice for your understanding of my SHB Cycle. I apologize! Please feel free to Email me your questions and perhaps we can quickly be on the same page.
MY SHB Cycle is linked to the mathematics to the development of My Inflection Point identification. The animated version of My SHB Cycle is in my personal blog and below hopefully will help you to understand that it is both a teaching tool for you and a unique way to look at the technical analysis needed to "Invest Wisely."
All securities go through these Cycles at one time or another. Each sector, industry group and company is some where on My SHB Cycle. It is when the general market, sectors, industry group and company are in sync that you have a 90+% investment opportunity to consider. It is a short-term, intermediate-term and long-term (both individually and combined) representation of the "Cycles" of the stock market that repeat themselves over and over again.
These Cycles are interlaced, which can mean that there is a primary, secondary, third, forth cycle, etc., for all securities, which are superimposed upon each other. I want you to read this twice: "It's very complex."
It is because this is or becomes so complex, I created My Rotation Model to help smooth out the bumps in your understanding. It provides me an ability to sort out many of these complexities and give me a much shorter list of Candidates for investment - both Bullish or Bearish.
It is important for you to realize that very few securities are in sync with both the My SHB Cycle and My Rotation Model at the same time. And that fact is a very big plus when going through my analytics process. When the are in sync you have a 90+% probability of profit. You also have a 6% - 12% additional profit on top of the absolute profit that can be projected for that company.
It is when you understand these facts, you will be consistently profitable, year over year.
When an Inflection Point is reached, my SHB - Cycle is not all that efficient, thus I have created a proprietary checklist I call "Conformations."
"Conformations," in my articles and commentaries are most often are verbally tied to My Inflection Points. I mention above and illustrate in my below graphic that the two are definitely inter-related.
This Graphic is the Foundation to Knowing for Sure - where we are on the Cycle of all Indices and Securities and hence we are - "Investing Wisely."
SHB Cycle - Explained (More Simple than the above - I Think!)
My SHB - Cycle is designed as a teaching tool to help explain My Methodology of "Investing Wisely" in ALL INDICES and SECURITIES. Be it Apple, Crude Oil, Gold / Silver or an ETF, this wonderful Tool - My SHB - Cycle continues to repeat its effectiveness in producing profit's year after year.
You might - Visualize a favorite company or investment that you follow, and you find that they match - historically - very well.
Knowing where we are in -- Rallies and Pull-Backs ! -- That's what it is all about.
Within My Methodology, there are several tiers / cycles of each - Rallies for Buying and Pull-Backs for Shorting. This includes: Primary, Secondary - third / fourth level tiers ( Cycles ) and so on. There is not enough profit potential in third / fourth or more - level tiers ( Cycles ) so - I use them as a "Technical Setup" (part of my Conformation Process) to identify Buying and Shorting - in Primary and Secondary Cycle / Investment Opportunities.
Historically - Primary Cycles occur (Bull & Bear) 3 - 5 times per year. Historically Secondary Cycles, which include the Primary Cycles, occur (Bull & Bear) 5 - 7 times per year.
This is serious stuff - exclusively for you folks that are Serious Investors and are truly interested in making money in the Stock Market ...
For Me and perhaps For You -- The Good News -- is ...
I have figured out how to make money using My ( conservative / low-risk ) Methodology and the Three Pillars that are so very supportive.
Keep Smiling, Have Fun - "Investing Wisely",