Phase shifts in the 40.68-month cycle
by Gary Zin, Ph.D.
Phase shifts plague every cycle technician. Phase shifts, or apparent phase shifts, are often present
when a high or low of a cycle is expected but doesn't occur. Sometimes, if neither a cycle high nor low
occurs on its projected date, a cycle will shift 180 degrees to its subsequent anniversary date. Many times,
these phase shifts occur near major trend changes in the market.
By assuming that a change in market direction is probable near the date of a predicted high or low, other
trend-following indicators can be used to decide whether a high or low is really likely to occur.
Bullish and bearish cycles
Figure 1 shows a semi-logarithmic plot of monthly data for the S&P 500 from January 3, 1928 to March
31, 1989. Gertrude Shirk, past research director of the Foundation for the Study of Cycles, has monitored
a regular 40.68-month cycle in the stock market and projected that an ideal low period for this cycle
would occur near March 1989. (See "In search of the cause of cycles," S&C, March 1987 and "The
40.68-month stock price cycle," S&C, Ocotber 1988) The cycle labeled "Bullish" in Figure 1 tracks this
ideal 40-68-month cycle.