V.7:7 (220-223): Phase shifts in the 40.68-month cycle by Gary Zin, Ph.D.

V.7:7 (220-223): Phase shifts in the 40.68-month cycle by Gary Zin, Ph.D.
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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.

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