The 40-Week Cycle In The Stock Market by Jay Kaeppel
Is the market truly random? Some phenomena related to the
stock market would not be expected to exist if the market truly
There has been much debate in the investment
community regarding the existence of cycles in the
markets. Some claim that cosmic forces (a full
moon, for instance, or other celestial events) can
cause the overall mood of investors to swing from
high to low, often on a predictable and repetitive
basis. On the other end of the spectrum are those who dismiss such notions as hogwash. Most investor opinions
fall somewhere in between — not entirely sold on the idea, but
still willing to keep an open mind.
DO CYCLES EXIST?
In this article we will discuss the 40-week cycle in the stock
market. This information is not presented as proof positive that
cycles exist, but simply to make the point that there are
phenomena related to the stock market that would not be
expected to exist if the market were truly random.
Our analysis of the 40-week cycle starts on May 15, 1970,
and makes the assumption that a new 40-week cycle starts on
this date and a new 40-week cycle starts every 280 calendar
days after that. The hypothesis is that the first 20 weeks of a new
cycle represent the bullish phase of the cycle and that the last
20 weeks of each cycle represent the bearish phase of the cycle.