Solar Cycle 25 Portends Unstable Period in 2020 – 2025.
“Outlook 2020/2021 – Cycles & Fundamentals…
05-28-20 – Recent events in China and Hong Kong – and the corresponding action in Hong Kong’s Hang Seng Index – provide a textbook example of how cyclical and technical analysis can help anticipate the timing for related fundamental events. In order to best understand this, a few governing principles have to be understood and internalized.
First (in no particular order), there is the 90/10 Rule of Cycles in which a majority of a market move – or in this case, the majority of a corresponding fundamental event – occurs in the final phase of that cycle. There are many reasons for this but the greatest is market overreaction.
In short, a surprise event occurs and the market overreacts – to the upside or downside – and then snaps back toward its point of equilibrium… or at least a more accurate assessment of its true, current value.
Since that was an extreme event, and the market went much farther than it should have, the resulting high or low will likely hold for a substantial period of time – creating the fulfillment of that cycle high or low. A similar occurrence happens near the culmination of a market cycle – whether or not a surprise fundamental event drives that move.
In that case, a market will be building upside or downside momentum in a fairly rational move – until it ‘crosses the Rubicon’ or passes a point of no return. It is at that point that the emotional masses, many of which had not even been paying attention up until that point, suddenly panic to enter or exit that particular market.
Consequently, the market overreacts again (or at least the participants in that market overreact) and is driven to an extreme that does not reflect its true current value and should never have been reached in more sane and rational times.
That action often takes the form of a parabola – or an avalanche – accelerating in the final days or weeks of a much larger-magnitude trend. The result is that a large percentage of the overall move – much of which is completely unjustified by a more accurate assessment of that market’s value – occurs at the very end of that cycle, when everyone is scrambling to get in… or get out.
That principle of culminating overreaction has spurred such time-tested adages as ‘its always most bullish at a top’ or ‘its always most bearish at a bottom’. If everyone is bullish – and has made their move in the market – who is left to buy that market and drive it any higher?
Or, If everyone is bearish – and has made their move in the market – who is left to sell that market (or liquidate holdings) and drive it any lower?
H.A.M.C.
This principle often bleeds into another principle – the Axiom of Market Correlation. The primary reason has to do with these parabolic moves, which often occur in the very latter stage of a bull market (or a blow-off decline in a bear market). That is usually the time when time-tested market correlations fall into place and markets move in lockstep with one another… for a VERY limited time.
In this case, I am more focused on the moves at the culmination of a trend and how certain markets can be more revealing at that point in time…
Looking Ahead
The reason for reviewing this scenario is to illustrate how these cycles often give a precise timing aspect to the future extrapolation of developing fundamental events (or pinpoint when a Black Swan event could emerge and shock the markets).
That brings us to another review of the 2018 – 2022 outlook [reserved for subscribers]…”
Solar Cycle 25, which began in Dec ’19, is forecast to be much stronger than what the experts have been saying. Since the mid-2010’s, INSIIDE Track has detailed why 2021 – 2025 should be an unstable time in the markets, in interest rates and inflation** (inflation forecast to surge from mid-2020 into 3Q ’22 while interest rates are forecast to rise from 3Q ’20 into 2Q ’23), in geopolitical turmoil (War Cycles return in late-2021 – late-2025), and geophysical instability (earthquake cycles rising throughout this period and coinciding with volcanic cycles colliding in 2022 – ’24). China is likely to play a key role in some of these factors. **Commodity prices are a key component in that and are directly impacted by solar activity.
That period was forecast – since 2009 and again in 2014 – 2016 – to be preceded by the recurrence of Disease Cycles, colliding in 2019/2020. [See https://www.insiidetracktrading.com/wp-content/uploads/2020/04/11YC-Stock-Panics-Global-Shaping-Events-1.pdf & https://www.insiidetracktrading.com/wp-content/uploads/2020/04/2016-The-Golden-Year-III.pdf] Extreme lows in solar activity have often coincided with major disease/viral outbreaks… and this time appears to be no different.
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.