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2001issue C111-4

Regime-dependent cycle timing after four-year and seasonal lows

A combined oscillator and cycle procedure can locate four-year and seasonal lows on an equity index from ordered price history. Historical four-year and seasonal samples then classified those swings by how soon they topped and whether the prior low was later taken out.

  • A combined oscillator and cycle procedure can locate four-year and seasonal lows on an equity index from ordered price history over a defined sampling window.
  • From 1896 through 1998, every Dow Jones Industrial Average four-year cycle that topped in 20 months or less later took out the previous four-year cycle low.
  • Seasonality analysis classifies a seasonal cycle by how soon it tops after its last low and whether that prior seasonal low is later taken out.
  • Editorial reading: treat the dominant cycle as a regime filter first. A short time-to-top is a change in the rules for whether the prior low is likely to hold, not a price target.
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Current trackSeasonality analysis65 readingsSeasonal trading90 readingsDominant cycle detection138 readings

Locating four-year and seasonal lows

A combined oscillator and cycle procedure can locate four-year and seasonal lows on an equity index from ordered price history over a defined sampling window. In this usage, the dominant cycle is the recurring four-year swing in an equity index whose highs and lows are located from that ordered history and then used to set a defined look-ahead for the next turning window.

On the 1990 to August 2001 Dow Jones Industrial Average chart, the four-year-cycle oscillator moved below the 65 level at every four-year low marked in that sample.

Short tops and the prior four-year low

From 1896 through 1998, every four-year cycle in the Dow Jones Industrial Average that topped in 20 months or less later took out the previous four-year cycle low. Across the five four-year cycles that topped in 20 months or less, the declines from those highs to the subsequent lows were 46 percent, 44 percent, 86 percent, 40 percent, and 16 percent, averaging 46 percent.

Three additional four-year cycles, in 1921, 1970, and 1974, also took out the prior four-year low even though they did not top in 20 months or less.

If the 1998 four-year lows and the early-2000 highs are treated as the cycle under study, the advance to those highs lasted 16 months on the Dow Jones Industrial Average and 17 months on the S&P 500, placing that cycle in the short-top regime.

Seasonal cycles inside the same clock

Seasonality analysis is a regime overlay that classifies the market by how soon a seasonal cycle tops after its last low and whether that prior seasonal low is subsequently taken out. In S&P 500 seasonal cycles studied from 1955, nine tops occurred in five months or less, and in all but one of those cases the previous seasonal-cycle low was taken out.

Confirming a seasonal high or low before acting

Seasonal trading is a testable entry, exit, and abstention procedure that waits for a seasonal high or low to be confirmed against stated price and calendar constraints before acting. A seasonal-trading rule in that study required prices to hold the March 2001 lows and to exceed the May highs only after at least seven months if the prior seasonal low was to be treated as still valid.

Educational research material, not investment advice. Historical source context does not establish present-day performance.
14 of 41 in the Seasonality analysis track
20021-4 pp.Next on Seasonality analysisA 2002 case study in regime-first seasonal selectionShort-term selection was described as a top-down regime screen: market direction, then S&P sector products, then groups, then names, often overweighting several stocks in one group.
All readings on this track · 41 readings
  1. 1989Evaluating venue volume as a speculation-breadth signal
  2. 1991A thirty-name price-weighted average as a seasonal regime classroom
  3. 1991Ranked half-year rate changes as an equity signal filter
  4. 1991Demographic wave as a market-regime overlay
  5. 1994Seasonal range regimes as a futures context overlay
  6. 1996Evaluating presidential party terms as equity regimes
  7. 1996A dominant cycle is a baseline, not a reprint
  8. 1996Seasonality and presidential election cycle regimes
  9. 1997Stacking calendar regimes around election years
  10. 1997Calendar seasonality as a testable trading procedure
  11. 1997Lunar phase delay as a testable seasonal regime
  12. 1998Seasonal system construction without curve-fitting
  13. 1999Crowd life cycle as a market regime map
  14. 2001Regime-dependent cycle timing after four-year and seasonal lows
  15. 2002A 2002 case study in regime-first seasonal selection
  16. 2002Seasonal windows and dominant-cycle rules
  17. 2002Fifty-four-year wholesale cycle as an inflation-deflation regime map
  18. 2004The championship conference rule as a yearly regime case study
  19. 2004Election-year seasonality as trade regime context
  20. 2006Two-ten inversion as an intermarket regime filter
  21. 2006Midterm-to-presidential seasonal holding window
  22. 2008Two-layer equity regimes from seasonality and price history
  23. 2008Seasonal futures as a regime filter, not a calendar rule
  24. 2008Retesting seasonal rules when regimes change
  25. 2010Corn and wheat staggered calendars as dollar-neutral seasonal spreads
  26. 2011Name the S&P 500 trend regime before using weekly and monthly seasonality
  27. 2012Seasonal windows that wait for confirmation
  28. 2013Pair-sleeve rotation as a two-state sector regime-switch
  29. 2013Lunar phase as a seasonal overlay on implied volatility
  30. 2013Soybean seasonal highs in a five-year carryover regime
  31. 2014Year-end tax-loss selling as a seasonal regime
  32. 2017Calendar-window overlays that mute mechanical signals without rewriting the system
  33. 2017A four-year cycle and volume case study of a secular bear
  34. 2017Treat the valuation climate as climate and implied-volatility extremes as weather
  35. 2019Seasonal depth versus tracking for futures position sizing
  36. 2019Stacking cycle forecasts with seasonal regimes
  37. 2019Hit-rate gates for seasonal regime evaluation
  38. 2019July to October as a seasonal window, not a reason to own the name
  39. 2020A recession-regime checklist from valuation stretch and the yield curve
  40. 2020Treat a seasonal idea as a stay-or-sit holding procedure
  41. 2020A single position as a sleeve on a seasonal regime map
By fieldSeasonality and regimes131 readingsBy year200183 readings
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Also on Seasonality analysis5 readings
2002Seasonal windows and dominant-cycle rules1989Weekday price paths are regime-dependent1990Calendar windows as testable index-futures procedures1991A thirty-name price-weighted average as a seasonal regime classroom1996Evaluating presidential party terms as equity regimes