An Important Stock Market Cycle Has Bottomed

The 1-4-10 year cycle indicated that it would be a weak year, especially in Q2 and Q3. The 1-year cycle is simply the annual cycle of the year that market watchers are well aware of. The 4-year cycle has been connected to the election cycle. The theory is that the central bank creates the cycle to support the incumbent. However, this cycle existed before the creation of the Fed in 1913. It also exits in countries where there is a 6-year election cycle or no elections at all. Simply put, there is a 4-year cycle. The 10-year cycle is the decennial pattern that was discovered by Edgar Laurence Smith at Ameritrust Bank. Within the composite below, it is this cycle that is hitting a low right now.

The composite cycle has been an accurate guide in 2022. It bottomed in the 4^th week of June and the market bottomed in the 3^rd week of June. The cycle then topped in the last week of August, and the indices topped in the third week. The cycle bottomed in the last week of September. Given the level of pessimism and oversold conditions, the cycle has some confirmation that points to strength through Q4.