Cycles Time
Cycles Time
A brief
overview of
cycles and
time....
and how we
apply both to
trading and
investing.
Chapter 1
Cycles
There are many different types of cycles, there are time and
calendar cycles, cycles in physics, organic cycles, planetary
cycles, social cycles, business cycles, spiritual cycles, war
cycles, agriculture cycles, life itself is a cycle from birth to death.
As it relates to trading and investing, we focus on the global
business cycle and the individual price cycles that emerge within
different markets as well as individual price patterns of a
particular security or asset.
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Cycle exists, then man and his government, driven by special conviction that business cycles were not inevitable, that
interests, are incapable of manipulating its outcome. The entire government policy could and should keep the economy close to
foundation of Marxism was the recognition of the Business Cycle a path of steady real growth at a constant target rate of
and the idea that it could be eliminated by confiscating all the unemployment. … By the early 1970s, the persistence of
wealth of the people. Even John Maynard Keynes (1883–1946) inflationary pressures, even in the face of mild recession, began
followed this basic tenet of Karl Marx (1818–1883) and assumed to flash some danger signals; the responses of the economy to
that government had a role it could play in preventing the the twisting of the dials of monetary and fiscal policy no longer
Business Cycle from rising and falling. Yet in the midst of such seemed quite so predictable. But it was not until the events of
adversity, what these ideas ignored is that man learns from his 1974 and 1975, when a recession sprung on an unsuspecting
mistakes, as an individual as well as a group. It has been through world with an intensity unmatched in the post-World War II
the Business Cycle that all advancement and thus economic period, that the lessons of the ‘New Economics’ were seriously
evolution emerges. Joseph Schumpeter (1883–1950) called these challenged.”
Business Cycle events – Waves of Creative Destruction. Unless
Even Chairman of the Federal Reserve Arthur Burns (1904-1987)
oil rises in price to excessively high price levels, alternative fuels
shared the same view. Government with all its power and
will never be developed. There must be a viable economic
endorsement of John Maynard Keynes (1883-1946) who argued
foundation to open the door to whatever new alternative might
exist. This becomes the economic evolution within society.
“Not much more than a decade ago, in what now seems a more
innocent age, the ‘New Economics’ had become orthodoxy. Its
basic tenet, repeated in similar words in speech after speech, in
article after article, was described by one of its leaders as ‘the
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that the economy can be managed to eliminate the Business Cycle, has been unable to prevent
recessions and economic booms.
Indeed, the Business Cycle is as regular as the four seasons for even weather is incorporated within it.
As weather has fluctuated according to a 300-year cycle in the energy output of the sun, mankind has
been driven hither and yon in search of better weather and food supply. Thus, migration throughout the
world has also been a byproduct of the Business Cycle.
The Economic
Confidence Model (ECM)
is a refined theory of the
Business Cycle by Martin
Armstrong and his firm
Princeton Economics. The
Business Cycle has been
observed by many over
the centuries and the
driving mechanism is
indeed complex, but it
certainly incorporates
many aspects from the
repetitive forces of nature
as in the changing
seasons and the repetitive
forces driven by the
passions of man.
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Everything is incorporated within the Business Cycle from traveled in a wave formations with two components - electric and
weather to politics. Nothing moves in a straight line. Even your magnetic fields. The magnetic filed provides the outer-boundary
heart beats in a cycle. Nothing is free of a cycle as long as it lives, limits at either side of the center line or mean within which the
life itself is a cycle. electric field travels.
When Marty discovered the ECM he did not begin with a He then looked for a similar structure within the economy
predetermined theory of cycles but rather discovered it when assuming that the design of nature was uniform and did not just
doing research and studying the international economic panics
throughout history. Much of the following that is written here
regarding cycles is from Martin's work and his
company's research reports (Princeton Economics Research
Institute) . Martin began to notice a pattern emerging from these
key financial panics. He took a period of 224 years from 1683 to
1907 and divided the number of panics in the list being 26 and
came up with the number 8.6153846615. Later this calculation
would prove to be a
very important
discovery. Taking this
idea of a business
cycle, Martin began
testing the 8.6 year apply to physics but to the business cycle as well. He then
interval. discovered the 2nd component which is similar to the magnetic
field in economic terms, which is VOLATILITY. Now the business
Having experience
cycle was beginning to take shape.
with electrical
engineering, Martin Martin then found that the 8.6 year frequency built up in intensity
realized that light forming longer-term waves of 51.6 years. The principle of volatility
meant that there had to be 2 opposite attractors of equal force,
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like a pendulum swinging from one extreme to the other. All things the VERY DAY, he was stunned. Further investigation led him to
posses these opposing forces - like good and evil - male and the next great discovery that this number was actually a
female. Cycles exist because this is the core of existence it is the derivative of Pi - 3.14159265359. The number of days within the
divine structure of the universe whereby energy travels from one 8.6 year frequency was 3,141 days, take Pi multiplied by 1,000,
place to another. Everything cycles from subatomic particles to you arrive at this number - it was the perfect cycle. The
the planetary cycles, right down to mathematical order is astonishing. If he took half the number of
the cycle of life itself from birth events , 13, and divided that into 8, the resulting calculation
through adulthood to eventually produced the same decimal of the 8.6 calculation - .6153846615.
death. What he discovered was that There are other hidden regularities that emerged such as the
it was impossible to remove nature method of reducing and adding every digit irrespective of the
from the business cycle since nature decimal and subtracting 1 returned Martin to the same spot
was a large part of its fundamental (86153846615=53-1=52, twice the unit of 26). Not only is 8.6
structure driven by weather, natural years equal to the perfect number of Pi *1,000 days, what also
disasters, plague, periods of plenty emerged was 8.6 times 3 is 25.8 with the Precession of the
and periods of famine. Even the equinox being 25,800 days.
Biblical account of Joseph tells of this cyclical nature where
The cycle that Martin stumbled upon was the perfect cycle of pi
Joseph interpreted Pharaoh’s dream of 7 years of plenty followed
that reveals the hidden order behind all things. The 8.6 year cycle
by 7 years of drought.
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By understanding the principals of cycles at work within
everything on both a grand and minuscule scale, we arrive at the
importance of this cyclical structure in trading and price
movements.
builds into six waves of 51.6 years which also then builds into six
waves forming 309.6 years.
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Chapter 2
Complex Dynamics
The above picture is a graphic detail of what is called the Gaston Julia at the beginning of the 20th century. Complex
Mandelbrot Set. Mandelbrot set images are made by sampling dynamics is the study of dynamical systems defined by iteration
complex numbers and determining for each whether the result of functions on complex number spaces. A dynamical system is
tends towards infinity when a particular mathematical operation a concept in mathematics where a fixed rule describes the time
is iterated on it.The set is closely related to Julia sets (which dependence of a point in a geometrical space. Examples include
include similarly complex shapes) and is named after the the mathematical models that describe the swinging of a clock
mathematician Benoit Mandelbrot, who studied and popularized pendulum, the flow of water in a pipe, and the number of fish
it. Images of the Mandelbrot set display an elaborate boundary each springtime in a lake. Dynamical Systems theory deals with
that reveals progressively ever-finer recursive detail at increasing
magnifications. The "style" of this repeating detail depends on
the region of the set being examined. The set's boundary also
incorporates smaller versions of the main shape, so the fractal
property of self-similarity applies to the entire set, and not just to
its parts.
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the long-term qualitative behavior of dynamical systems, and describes what future states follow from the current state. The
studies the solutions of the equations of motion. These systems rule is deterministic; in other words, for a given time interval only
are primarily mechanical in nature; although they include both one future state follows from the current state.
planetary orbits as well as
The concept of a dynamical system has its origins in Newtonian
the behavior of electronic
circuits and the solutions to mechanics. There, as in other natural sciences and engineering
partial differential equations disciplines, the evolution rule of dynamical systems is an implicit
that arise in biology. Much relation that gives the state of the system for only a short time
of modern research is into the future. (The relation is either a differential equation,
focused on the study of difference equation or other time scale.) To determine the state for
chaotic systems. all future times requires iterating the relation many times—each
advancing time a small step. The iteration procedure is referred to
The Lorenz system is a as solving the system or integrating the system. Once the system
system of ordinary differential equations (the Lorenz equations) can be solved, given an initial point it is possible to determine all
first studied by Edward Lorenz. It is notable for having chaotic its future positions, a
solutions for certain parameter values and initial conditions. In collection of points known
particular, the Lorenz attractor is a set of chaotic solutions of the as a trajectory or orbit.
Lorenz system which, when plotted, resemble a butterfly or figure
In mathematical physics,
eight.
equations of motion are
At any given time a dynamical system has a state given by a set equations that describe
of real numbers (a vector) that can be represented by a point in an the behavior of a physical
appropriate state space (a geometrical manifold). Small changes system in terms of its
in the state of the system create small changes in the numbers. motion as a function of
The evolution rule of the dynamical system is a fixed rule that time. More specifically, the
equations of motion
describe the behavior of a
The Lorenz attractor arises in the study of the Lorenz
Oscillator, a dynamical system. 11
physical system as a set of Interactive 1.0 Kinematic Quantities
mathematical functions in terms
of dynamic variables: normally
spatial coordinates and time are
Kinematic quantities
used, but others are also
possible, such as momentum
components and time.
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Equations of motion can therefore be grouped under these main time coordinates, as influenced by forces or energy
classifiers of motion. In all cases, the main types of motion are transformations.
translations, rotations, oscillations, or any combinations of these.
However, the equations of quantum mechanics can also be
considered equations of motion, since they are differential
Movie 1.0 Coupled Oscillators
equations of the wave-function, which describes how a quantum
state behaves analogously using the space and time coordinates
of the particles. There are analogs of equations of motion in other
areas of physics, notably waves.
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equation varies depending on the type of wave. A wave can be Trending markets most resemble transverse waves oscillating
transverse or longitudinal depending on the directions of its perpendicular (or right angled) to the direction of energy transfer.
oscillation. When markets settle into sideways range trades or consolidation
periods, the wave structure more so resembles that of
longitudinal waves (like sound waves as previously mentioned).
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Section 2
There is at the core a system of self-referral in nature and symmetry. The design of the Koch snowflake is a fractal that
throughout the universe. begins with an equilateral triangle and then replaces the middle
third of every line segment with a pair of line segments that form
The word FRACTALS comes from the Latin frāctus meaning
an equilateral replication. The design of a fern is another
"broken" or "fractured", and it is used to extend the concept of
example. The individual leafs reflect the overall design of the tree
theoretical fractional dimensions to geometric patterns in nature.
itself with a trunk and branches that
We see these patterns in the inherent design of the universe and
emerge from the sides. This is fractal so
they are often found in a self-referring symmetrical structure. All
that you can look at the leaf and still see
living organisms are designed based on their DNA. This DNA
the same pattern forming the tree. This
coding provides instructions for development, and it is this
is the fractal nature of everything
system of development that is self-referring whereby two parents
around us. It is the same structural
contribute their DNA to the offspring that combines the two
design being replicated from one level
strands and the result is a composite based upon the parents. In
to the next. The economy and the
other words, the offspring are similar to their parents because of
markets have this same self-referring
this self-referral process. This lies at the
fractal nature. We can see constant
core of everything - a structural design of
patterns being replicated from one level
self-similarity so that the net generation
of time to the next.
uses the code of the previous. We see
examples of this same self-referral Here are just a few examples of the same repeatable price trends
throughout nature. The non-aggregated on the charts. Notice how we have the same pattern on
snowflake often exhibits six-fold radial completely different time frames. We find the same patterns
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unfolding again and again on any time horizon, and it does not Here is another example on EURCHF same looking bottoming tail
matter the security or asset. Its all energy and it moves in the formation deep below the 200 period moving average (the red
same similar self-referring manner. line). We can see its almost the same pattern, its a very distinctive
“V” bottom formation. This truth about how the world is designed
Here’s a bottoming tail of the Swiss (USDCHF) on the weekly
and how price movements repeat in a fractal nature across all
chart back in 2011...notice how the bottoming tail and price
time frames is the key to understanding why our trading model
action occurs well below the 200 period moving and the tail is the
works so well across multiple time durations.
last exhaustion move forming the bottom with a rally of the lows
to follow.
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Chapter 3
Time
Time is a dimension that we divide up to mark its
passing. Most of our thinking in the west and in
economics is linear and is not cyclical or dynamic.
This has been one of our greatest failures in
education and finance. We must understand that
Time is but a cycle.
Section 1
Most of old Wall St. still believe that trading and investing is all and a variety of catalysts intraday - from economic numbers to
about the fundamentals or “valuation”, however these two central bank speakers - no doubt these events can be a source
categories should only make up 20% (if that) of your trading and of knee jerk market reactions and wide volatile swings in price
investment process. The smaller your time frame actually the action. However from a TIMING perspective, on the smallest of
less fundamentals you should use and really a day trade or micro timeframes, the fundamental factors have no bearing on sound
approach has zero to do with fundamentals. The reason being its proper micro market play.
all about TIME.
Also for the longer timeframes, the fundamentals should not be
The price action over the next 15 minutes in a market has your main driver of your market decisions and action. And here is
nothing to do with the fundamentals and has everything to do why. Any individual or organization will never have all the facts
with the energy and momentum in the market in that moment or for what it is they wish to make a decision about. Whether that
in that point in TIME. What is driving each tick on the small be a management strategy or an investment decision. For
timeframe is the balance of energy or power. Who’s the more example the insiders of a company can know all there is about
willing buyer or seller?. Who are the major players at that their particular business and the industry, but it is impossible to
moment in time that are flooding the market with buy orders or know all the external factors that influence that company such as
sell orders? Who is the panicked sellers in the moment? Who is competitors and suppliers. How can a company possibly know
backing off the bid or maybe there is no bid? This is the activity what its competitors are doing or not doing? What if company
and emotion of the small timeframe, and even in the 1 minute xyz just did a deal that essentially takes you out of the bidding or
chart there still is a flow or cyclical motion that moves through removes you from your competitive advantage? How can a
the market. It is not about the fundamentals of a week or month business possibly know what affect the weather will have on its
from now on the small timeframe. It is certainly true that news supply chain? How does the Orange Juice manufacture know
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ahead of time there is a tree-killing disease on its way from Asia 80%-90% loss in the value of the equity in that company just in
being spread by a specific bug migration? It’s impossible. anticipation of a possible bankruptcy. Also by the time the news
hits of the possible bankruptcy the stock will have already made
its move lower and the news of such bankruptcy more often then
not will then be the low. That is where the “Buy the Rumor - Sell
the News” adage comes from, the markets move in anticipation
of reality and often times what “should be” never even
materializes. In other words, that price action and the movement
that ends up happening in the markets often times never reflects
the reality of the situation or the actual truth of the matter. Its all
anticipation and perception of a possible future outcome, it’s a
CONFIDENCE game.
You will never have all the facts. This alone makes trading and One more problem with focusing on just fundamentals is that you
investing solely on the “fundamentals” a fools game. Even if you ignore another market force, and that is POSITIONING. Not only
had all the fundamentals (which is a fallacy), this doesn’t mean does perception, psychology, emotions, and confidence of the
the market will move to that desired or correct fundamental market participants matter; but the positions of these market
valuation. The markets move in ANTICIPATION of what they players matters tremendously. If the crowd correctly perceives
perceive. And that perception, whether it accurately reflects what that the market is tremendously overvalued and expensive
is true or false, is irrelevant because the market will move in relative to another investment or similar markets, this may be true
anticipation of what it believes is true not what is actually true. For of the underlying asset or market but this alone does not mean a
example, a stock can collapse in anticipation of a company going counter move in the opposite direction is possible. Often times a
bankrupt even if the final outcome is not bankruptcy. The crowded trade can move quickly in the opposite direction of the
company may indeed survive and not file bankruptcy or perhaps perceived market outcome. For example it may be accurate that
the truth is that the company really is solvent. It doesn't matter there is a vast shortage of Wheat in the grains market due to say
what the truth is during this period of time, it only matters what a severe drought, however if the majority of market players are
the market believes is the truth. The market could price in already long from already high levels anticipating more upside
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with the shortage in supply, it doesn't take much just a small collapse over the following year back down to the $30 level? You
move lower in the price for the majority to begin to feel pain from have to ask WHEN will oil be $30. It does no good to tie up
being long from bad levels. This selling after the majority are capital you could be using for an investment that is working for
already long, leaves little to no more fresh buyers. The smallest you and producing returns NOW. Not only that but if the market
amount of selling can force weak longs to sell and incrementally moves to $150 first you and everyone else will be stopped out
more selling that creates a snowball with a mad dash for the exit. and then most likely you will not have the courage to re-short and
This would be a clear example of how positioning impacts the you will miss the final collapse to your initial target. So in that
market price more so then the actual fundamentals of supply and scenario you were
demand. right about the
eventual $30 level but
And lastly we need to understand where TIME comes into play as
your timing was
well vs fundamentals. It does no good for an investor to tie all up
wrong. This is why
his or her capital in an investment that goes nowhere and is
TIMING matters above
dormant for years or decades waiting for the market to price that
all else.
investment or security in-line with the fundamentals. Just
because you think something should be worth a particular price So the next question
you could be right fundamentally speaking but it is a waste of then becomes how do
time and capital if the market doesn't view it as the right TIME for we build a model and
the particular price to come in-line with the fundamentals. The learn to trade/invest around TIMING? This is what our model and
simplest way to put this is, God himself can come down and tell process is all about - not just price but TIME.
you what the price of Oil should be based on the true
Timing the markets and cycles go hand in hand, its important to
fundamentals or intrinsic value of that commodity in that region
use both and to understand the relationship. Long-term bear
etc. And lets say oil is trading at $100 a barrel, God tells you it
markets tend to last in time units of 2-3 years while bull markets
WILL be $30 that is where oil should trade. What is your next
tend to last in units of 5-8. The reason bear markets have a
market action, what do you do? Do you sell short oil? What if the
shorter duration is the nature of human emotion. It takes humans
price of oil then goes sideways first for 2 years between $100 and
much more time to gain confidence while it takes much less for
$110, and then sky rockets to $150 in 2-3 months only then to
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us to loose confidence in someone or something. Fear is a He described the idea of a place value, whereas the position of a
stronger emotion then greed. The cyclical units of time break figure determined where it is a unit, such as 10, 100, 1000 and so
down in derivatives of Pi we already touched on this in Chapter 1 on. Fibonacci is probably best known for his sequence derived
but again 1.075 units of time build into 2.15 units that make up from a pair of multiplying rabbits (1, I, 2, 3, 5, 8, 13, 21, 34, 55 .•. )
the 8.6 unit frequency that builds into the 51.6 and 309.6 wave. where the progression follows what has become known as the
Again the number of days in 8.6 years is 3,141 days (Pi x 1,000), “golden ratio” 1.6180 .
8.6 times 3 is 25.8 with the Precession of the Equinox being
25,800 days. There are 13 and 19 period cycles, take 8/13 and
we get the decimal of the 8.6 year frequency .61538462.
This method allowed calculation that was not taught in schools thinkers of all disciplines like no other number in the history of
and was unknown in Christian circles. Fibonacci’s “Liber Abaci” mathematics. We can see that clearly there is a hidden design to
If you like this information here in this eBook and you’d like more
great training on markets, cycles, technicals, and how to add a
real edge to your trading and investing email my partner at
Ritas@jenkinsrm.com or visit our website at http://
www.jenkinsrm.com
-- Jason Jenkins
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