Bonds & Notes’ Sell Signals Intact as Multi-Year Cycles Peak in Stocks.
Outlook 2022/2023 – Cycle Culminations
01-04-22 – 2016 – 2021 underwent another major economic shift and accompanying Currency War in line with the 40-Year Cycle of Currency Wars that has repeated since before the founding of the USA.
As described throughout the 2010’s, that cycle was expected to usher in a heightened battle against US Dollar hegemony around the globe and likely result in a new reality that would subsequently unfold in the 2020’s.
2016 – 2021 was forecast (in 2013 – 2016) to possess some subtle & some not-so-subtle ‘battles’ with a primary one projected to unfold between the US Dollar (fiat currency) and Gold (hard currency) – with Gold forecast to gain progressively throughout 2016 – 2021. At the same time, a third combatant entered the fray – digital or crypto-currency.
Even though the US Dollar Index – an index that reflects the Dollar’s perceived value versus a basket of other fiat currencies (the healthiest or least healthy horse in the glue factory) – was projected to rally from 2014 into 2017, Gold was forecast to enter another multi-year bull market in 2016 & stretch that into 2021.
The Golden Year
The synergy of cycles in 2016 was so significant that three years of articles, interviews and publications were devoted to discussing the impending bottom in Gold and why 2016 would usher in a new reality – dubbing 2016 as The Golden Year (‘The Golden Year’ – described throughout 2013 – 2015 – was the year when a new ~5-year advance would begin – see insiidetracktrading.com/wp-content/uploads/2018/07/ 2016-the-golden-year.pdf).
That Gold forecast was also tied into Solar Cycles (2020 – 2024), impending War Cycles (2021 – 2025) and Disease Cycles described in 2009 – 2014 (that projected a major viral or disease outbreak for 2019 – 2021 – see insiidetracktrading.com/wp-content/uploads/2020/04/ 2016-The-Golden-Year-III.pdf).
Gold & Economic Cycles
As it turned out, Gold bottomed in Dec. 2015, fulfilled almost everything written about 2016 (The Golden Year), and advanced into the final half of 2020 before peaking. That powerfully fulfilled the latest phase of this 40-Year Cycle of Currency Wars while ushering in the time (2021 – 2025) when the onset of a literal military conflict is cyclically likely.
2021/2022 ushers in a new cycle, with the opening years often the most dramatic (transitions are always the roughest period before a new, or revised, ‘norm’ begins to take hold). One need only look at the early 1820’s, 1860’s, 1900’s, 1940’s & 1980’s to verify this pattern. In many cases, those transitions also began new economic upswings… so they were not all bad.
2022 has the potential for some intriguing parallels and also some stark contrasts to that pattern. Part of that has to do with the principles governing cycle analysis and Hadik’s Cycle Progression…
40-Year Low-Low Cycles
In the first half of the USA’s history (roughly from 1780 – 1900), the movement of Gold swung similar to that of the economy. Stable and dependable Gold usually coincided with a stable and dependable economy (more or less). Conversely, panics in Gold (like 1869) led to panics in stocks.
Since ~1900, the correlation has been inconsistent. However, 2016 – 2021 was similar with both moving higher throughout that time frame and both suffering sharp setbacks in March ’20. In order to better understand what is expected for the coming years, it is important to review a related 40-Year Cycle that has timed pivotal lows in the US economy…
1782 – Start of new country (and financial system) after end of Revolutionary War (Treaty of Paris drafted on Nov 30, 1782; peace negotiations began in April 1782); first American commercial bank is opened and a new monetary system begins to take hold after the collapse of the Continentals (paper currency).
The chart above provides a broad illustration of the economic growth in America in 1700 – 1850 with the two intervening low points spread exactly 40 years apart (surprised?) – in ~1782 and ~1822.
1822 – Follows Panic of 1819 and recession of 1819 – 1821, one of the worst in US history. It included mass unemployment and plunging property values that bottomed in 1822. However, there were far-reaching ramifications of that Panic, particularly the heightened skepticism of paper money that it raised among the American public. That is why Gold’s movement synced with the economy. To quote:
“The national bank’s reaction to the crisis—a clumsy expansion, then a sharp contraction of credit—indicated its weakness, not its strength. The effects were catastrophic, resulting in a protracted recession with mass unemployment and a sharp drop in property values that persisted until 1822.
The financial crisis raised doubts among the American public as to the efficacy of paper money, and in whose interests a national system of finance operated. Upon this widespread disaffection the anti-bank Jacksonian Democrats would mobilize opposition to the BUS in the 1830s. The national bank was in general disrepute among most Americans..” (wikipedia.org/wiki/Second_Bank_of_the_United_States)
1862 – Start of NY Gold Exchange; Along with stocks, gold rallied into 1869 (coincided with one of greatest bull markets in US stocks in 1860 – 1872)before Black Friday and a gold & stock crash surrounding an attempted corner on the gold market.
1902 – Stock market enters new advance following Panic of 1901 (attempt to corner Chicago rail market) – a sequence similar to what has played out in previous cycles as in 1822, following the Panic of 1819.
1942 – Stock market enters new advance following 1929 – 1942 bear market and 1937 – 1942 crash – setting one of its most significant lows in the 20th century (and the onset of one of the strongest advances).
1982 – Stock market enters new advance following 1966 – 1982 consolidation that included 1966 – 67 sell-off, 1973 – 1974 (50%) crash, 1976 – 1978 (~29%) decline, 1981 – 1982 (25%) drop – setting perhaps the most significant low in the 20th century (and the onset of the strongest overall advance).
While this might normally be perceived to augur a subsequent low in 2022 and the onset of a new multi-year advance, there are key reasons why this cycle is due for an inversion and why stocks could see a multi-year peak in 2022.
First and foremost is the 40-Year Cycle Progression illustrated at the top of this page. The decisive lows in the early 1860’s, 1900’s, 1940’s & 1980’s portend a likely inversion and a peak in 2022. That would fulfill a 40-Year low (~1862) – low (1902) – low (1942) – low (1982) – (high; 2022) Cycle Progression.
Reinforcing that is the 20-Year Cycle Progression illustrated at the top of this page. The decisive lows in 1942, 1962, 1982 & 2002 portend a (similar) likely inversion and a peak in 2022. That would fulfill a 20-Year low (1942) – low (1962) – low (1982) – low (2002) – (high; 2022) Cycle Progression…
All of that would dovetail closely with the 7-Year Cycle of Stock Crashes (20 – 35% or greater declines that culminated in 2016, 2009, 2002, etc.) recurring in 2023…
Stock Indices have rallied into early-Jan ‘22 – the fulfillment of multiple daily & weekly cycles that portend an early-year peak… an initial top has been forecast for the opening day(s) of 2022 and some indexes may have fulfilled that…
Many significant stocks and indexes fulfilled 1 – 2 year upside targets in Nov ’21 – ushering in a potential topping process that was expected to stretch into 1Q ‘22 (when stronger indexes could set final highs as other indexes diverge.
1Q ‘22 (most synergistic in Jan/Feb ‘22 and ideally in Jan ‘22) is the convergence of a web of 16, 8 & 4-month cycles AND the latest phase of the most consistent cycle of this century – the 3.25-Year Cycle.
That cycle was last involved in creating the Dec. ’18 low and projecting an overall advance into 1Q ’22 – when the next phase should invert and time a peak. That would fulfill a 3.25-year low (1Q ‘09) – low (2Q ‘12) – low (3Q ‘15) – low (4Q ‘18) – high (1Q 2022) Cycle Progression…
3 – 6 month & 6 – 12 month (and even 1 – 2 year) traders and investors should have been lightening up on long positions in early-Sept…
Bonds & Notes peaked in early-Dec with Bonds attacking their primary upside target based on the weekly trend pattern. In mid-Dec, they created a divergent top (lower high in Bonds, higher high in Notes) after Notes had twice neutralized their weekly downtrend but could not turn that trend up. That signaled a 1 – 2 month peak and spurred a quick reversal lower that is capable of stretching into Jan 21/24 – when intermediate cycles bottom.
On a broader basis, Bonds & Notes are steadily validating the overall outlook for 2020 – 2023 in which interest rates have been forecast to slowly rise in response to developing inflation and other factors.
The Bond peak in July ’20 perpetuated an uncanny 4-Year Cycle that timed multi-year highs in July ‘12 & July ‘16 and preceding lows in mid-2004 and mid-2008. That cycle projected that interest rates would slowly rise (and Bonds fall) in 3Q ‘20 – 3Q 2022, possibly extending into 2023.
Longer-term investors and hedgers could have been liquidating long positions in Bonds & Notes and selling on intermediate rallies in 3Q/4Q ‘20… and should have added to short positions in Aug ‘21.” TRADING INVOLVES SUBSTANTIAL RISK!
Bonds & Notes remain on track for a convincing decline into ~3Q ’22 (1/2 of 4-Year Cycle; with Oct ’22 representing a 4-year low-low cycle)… and ultimately into 2Q ’23. Beginning in early-Jan ’22, equity markets are on track to see some similar selling.
Inflation has been forecast to see a second surge into 2022 with Bonds, Notes and Stock Indexes poised to drop in reaction to that. Many stock indexes have fulfilled multi-year upside targets (‘5th of 5th of 5th wave’ peaks) and are fulfilling analysis for a final set of divergent highs in early-Jan ’22 before multi-year and multi-decade cycles portend a major decline. ‘Crash Cycles’ also kick in in 2022/23 (a ~7-Year Cycle that last timed sell-offs and lows in 2001/02, 2008/09 & 2015/16).
2021/2022 was expected to usher in a dramatic shift in multi-decade cycles (40-Year & 80-Year Cycles) – timing everything from War (late-2021 into late-2025), Climate (Drought Cycles peak in 2021/22 and shift to Deluge Cycles in 2022/23), Agriculture (80-Year Cycle shifts in 2022/23), Currency Wars (2021)… and Interest Rates. The final year(s) of a 40-Year Cycle of Drought (into 2021/2022) could sustain commodity inflation into 3Q/4Q ‘22… keeping negative pressure on Bonds.
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.