Topic Progress:

The word “cycle” comes to us from the Greek, and it means “circle,” which isn’t to be taken literally, but rather, serves as a reference to a complete sequence of events without the imposition of a particular time interval. Cycle Analysis, however, are only concerned with regularly occurring, “periodic” cycles.

The basic idea driving the theory is that there are forces like those described in the previous section that cause markets to fluctuate, and that these fluctuations form (approximate) time patterns. The parenthetical word “approximate” is key here. Cycle Analysis does not claim that cycles repeat at regular, highly predictable intervals of time, only that they occur at regular intervals forming approximate time patterns.

There are some (a distinct minority) of Cycle Analysists who claim that cyclical patterns are precise, but there’s very little evidence to support this notion. A fairer summation would be that there is an undeniable cyclical tendency in highs and lows, but although the pattern is broadly similar, the precise time interval can be (and usually is) longer and shorter between one cycle and the next.

If cyclic factors were the only forces driving the market, it’s entirely possible that the time intervals would be more predictable, but this simply isn’t the case, and it can be fairly assumed that those other factors bear some, if not most of the responsibility for drawing out or compressing the time interval between cycles. In fact, in extreme cases it can cause the cyclical high/low not to manifest at all.

Schwager and Mogey summarize as follows:

“The basic idea, however, is that there is enough regularity to market price cycle for this information to provide a useful element in making trading decisions.”

And at the end of the day, that’s what matters most!