Manfred Zimmel - Amanita Market Forecasting - Cycle theory introduction

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Cycle theory introduction

intermediate-termintermediate term means a time horizon of 1-3 months. Amanita cycle model

Gives windows of 2-4 weeks for intermediate-termintermediate term means a time horizon of 1-3 months. highs & lows - the 2nd Amanita key conceptafter the Amanita pivots. Within this 2-4 week period for a high or a low you either have only one Amanita pivot (the ideal case) or two (the normal case).

What are cyclesA cycle is a recurring event (in the markets).?

It would be easy to write a lot more on cyclesA cycle is a recurring event (in the markets). but this guide is intended to give a concise overview of the cyclesA cycle is a recurring event (in the markets). used by Amanita Market Forecasting (particularly taking the some 20 cycle categories into consideration). The Amanita model of holistic market forecasting has financial astrologyFinancial astrology is the use of astrology to analze and forecast the financial markets. Here financial astrology is understood primarily as an empirical-statistical discipline. The probably first financial astrologer in history was Thales of Miletus who is viewed as the father of science and philosophy (together with Aristotle). With the aid of astrology Thales foresaw an excellent olive harvest, so he hired all olive presses that he lent out with a huge profit, which made him a rich man. ranked #1 but already #2 are cyclesA cycle is a recurring event (in the markets)., all other methods of technical and fundamental analysis are considerably less important.

So cyclesA cycle is a recurring event (in the markets). are indeed a very strong technique and the reason why they are not widely recognized (especially in the academic world) is not because they are not working but rather because of the lack of a "rational theory" to explain them, an obstacle also playing a key role in astrology. The leading cyclesA cycle is a recurring event (in the markets). analyst Edward Dewey (1895-1978) was the chief economics analyst for the US Department of Commerce, in 1931 he was instructed to find the reasons for the global depression of the early 30ies (he later founded the "Foundation for the Study of Cycles"). Quote by Dewey:

"If there are regularly recurring ups and downs in business or in prices, all I have ever learned is wrong" an eminent economist once told me; and he added, in a moment of unusual candor, "I simply cannot afford to accept such an idea. All my life's work would be ruined.

One has to add that we don't have a rational theory for most standard technical indicator either (e.g. why do we have a trigger level of X in this market but a different level in another one?). For traditional economists cyclesA cycle is a recurring event (in the markets). are in the best case strange but strictly speaking completely incompatible with the ruling paradigm.

The meaning of the word "cycle" is derived by the Greek κυκλος which means "circle", the underlying assumption is that a cycle comprises the repetition of similar (homogeneous) events. Everything in our cosmos is more or less governed by cyclesA cycle is a recurring event (in the markets)., e.g. day and night, the seasons etc., and of course the markets.

Categories of cyclesA cycle is a recurring event (in the markets).

I have found 18 different cyclesA cycle is a recurring event (in the markets). (to my knowledge you won't find a comparably all-embracing compilation anywhere else):

  1. low-low cyclesA cycle is a recurring event (in the markets). : this is the classic type
    As an example I take the very precise and reliable 10-11 week cycle that is dominating the stock markets (length almost always 8-13 weeks), here plotted in the chart in the S&P 500 (SPX):
    downloaded-42211729d59411b6b662b87dc77727ad-1232706445.img---

  2. high-high cyclesA cycle is a recurring event (in the markets). : of high relevance in the commodity markets because cyclesA cycle is a recurring event (in the markets). are driven by the emotions of the market participants and commodities rise if fear (or even panic) prevails while stocks fall under the same conditions (crashes to the downside, not to the upside). That's why in the equity markets low-low cyclesA cycle is a recurring event (in the markets). work better and in the commodity markets partially high-high cyclesA cycle is a recurring event (in the markets).. In the currency markets this distinction becomes meaningless as a top in one currency always means a bottom in the other currency if you watch a currency pair (like EUR/USD for instance).
    example: the 4-months high-high cycle in gold
    downloaded-7c8868edfcf5ee884d604ad0cec2775a-1232706445.img

  3. seasonal cyclesA cycle is a recurring event (in the markets). : describe the typical pattern every year, they are not an exact cycle in the narrow sense of the word. The website http://www.seasonal-charts.com/ is the best source.
    example: September is the weakest market in the equities. By and large, the seasonal effects are more pronounced in the commodities.
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  4. CIT cyclesA cycle is a recurring event (in the markets). (Change In Trend): These cyclesA cycle is a recurring event (in the markets). are similar to market geometry.
    example: There is a 10-months CIT cycle in the SPX since the all-time high in March 2000: 3/24/00 - 1/31/00 - 12/5/01 - 10/10/02 - 8/6/03 - 6/24/04 - 4/20/05, in each instance was at least an intermediate-termintermediate term means a time horizon of 1-3 months. trend reversal and partly even yearly highs and lows.
    downloaded-c5d7ed705755f370c13002fdcc3bd3d5-1232706445.img

  5. inversion or non-inversion cyclesA cycle is a recurring event (in the markets). : has a cycle always be of the same polarity (high or low) or may it flip, as an exception? CIT cyclesA cycle is a recurring event (in the markets). are by definition inversion cyclesA cycle is a recurring event (in the markets)., the classical cyclesA cycle is a recurring event (in the markets). forbid that, and there are many intermixtures, e.g. cyclesA cycle is a recurring event (in the markets). that do favor a specific polarity.
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  6. fixed and mutable cyclesA cycle is a recurring event (in the markets). : depends on the cycle duration that is either completely pre-determined and unalterable (primarily the astrological cyclesA cycle is a recurring event (in the markets).) or flexible within specific boundaries (non-astrological cyclesA cycle is a recurring event (in the markets).).
    example: a fixed cycle is the Tzolkin cycle of 260 days (a matrix of 20 Solar Seals und 13 Galactic Tones of Creation), s mutable is the10-11 week low-low cycle for the SPX.
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  7. continuous or setting-out cyclesA cycle is a recurring event (in the markets). : is the failure of a cycle hit tolerated exceptionally or not?
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  8. temporary or permanent cyclesA cycle is a recurring event (in the markets).: either the cycle has been observed over the total observation period or only temporarily over a specific period
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  9. exclusive and parallel cyclesA cycle is a recurring event (in the markets).: classic cyclesA cycle is a recurring event (in the markets). are exclusive because they are hierarchically structured and there is only cycle for every cycle length; a more flexible interpretation allows overlaps and parallel cyclesA cycle is a recurring event (in the markets).
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  10. pattern cyclesA cycle is a recurring event (in the markets).: follow a certain pattern with a fixed internal structure
    examples: the "big finger" and "small finger" cyclesA cycle is a recurring event (in the markets). by Dr. Theodor Landscheidt or the Delta cycle by Welles Wilder where you have a pattern repetition every 4 synodic moon cyclesA cycle is a recurring event (in the markets). or 4 years (among other intervals). The PEI cycle by Martin Armstrong is a story by itself, it is probably the best pattern cycle.
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  11. alternation cyclesA cycle is a recurring event (in the markets). (high->low and low->high): in this case a low predicts a high and vice versa; going back to George Lindsay
    example: in the oil market there is usually an intermediate-termintermediate term means a time horizon of 1-3 months. top ca. 8.6 months after an intermediate-termintermediate term means a time horizon of 1-3 months. bottom

These cyclesA cycle is a recurring event (in the markets). are common knowledge, I want to add 7 new cyclesA cycle is a recurring event (in the markets). developed in the past years:

  1. CSQN cyclesA cycle is a recurring event (in the markets). ("conditio sine qua non"): this cycle was found in 2002, it refers to cyclesA cycle is a recurring event (in the markets). that are absolutely necessary for a given event type. e.g. for intermediate-termintermediate term means a time horizon of 1-3 months. reversals. To put it that way: not every CSQN cycle coincides with the relevant event but practically all respective events (P>90-95%) have this cycle present. Starting from that point the proprietary Amanita pivots with the CSQN model have been developed.
    example: The Galactic Center is an astrological CSQN indicator, the same principle applies to non-astrological CSQN cyclesA cycle is a recurring event (in the markets)..
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  2. master cyclesA cycle is a recurring event (in the markets).: a master cycle is the strongest (dominant, most reliable and accurate) one in  a given category
    example: the 10-11 week cycle mentioned above is the master cycle in the short- to intermediate-termintermediate term means a time horizon of 1-3 months. level while the 9-months cycle ("pregnancy cycle") is the master cycle in the intermediate-termintermediate term means a time horizon of 1-3 months. to longer-term class.
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  3. polarity cyclesA cycle is a recurring event (in the markets). (bull and bear cyclesA cycle is a recurring event (in the markets).): this category was discovered in in 2003, it is the non-astrological equivalent to the Amanita constellations.
    Actually, the rhythmic triggers by the German astrologer Wolfgang Döbereiner gave me the idea. Bull and bear cyclesA cycle is a recurring event (in the markets). are bullish and bearish inputs in constant intervals. As opposed to the other categories, this cycle translates immediately into long or short signals that's why it's even easier in the practical application than other cyclesA cycle is a recurring event (in the markets)..
    I haven't read explicitly about this type anywhere but it is implicitly contained in some cyclesA cycle is a recurring event (in the markets)., e.g. in the 4-year US presidential cycle where the 2nd year (2002, 2006) is very bearish and the 3rd year (2003, 2007) pretty bullish.
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  4. cyclesA cycle is a recurring event (in the markets). with one or two apexes: explained below
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  5. family cyclesA cycle is a recurring event (in the markets). : I am often working with "market families" that are markets that are very close to each other and to some degree interchangeable (very high correlation), that's why cyclesA cycle is a recurring event (in the markets). can "jump" from one market to another within the family.
    example: The previous metals family embraces gold, silver and the mining indices HUI and XAU, the oil family Brent and Crude Light (both spot and future) etc.
    Now I have cyclesA cycle is a recurring event (in the markets). that are optimized for the whole family, i.e. rare outliers (divergences) of selected members of the family are not taken into consideration. There is usually a clear "patriarch" (leading market) with most cyclesA cycle is a recurring event (in the markets). working best for that market, being in the center of analysis.
    example: In the oil family Brent spot is the "patriarch", sometimes however Brent Future or Crude Light Spot or Future are taking that role. For the equities the S&P 500 is almost always the patriarch.
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  6. meta-cyclesA cycle is a recurring event (in the markets). : Cycles themselves are subject of higher meta-cyclesA cycle is a recurring event (in the markets)., i.e. the behavior of cyclesA cycle is a recurring event (in the markets). is again determined by cyclesA cycle is a recurring event (in the markets)., e.g. there are cyclesA cycle is a recurring event (in the markets). that change the average length of a cycle.
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  7. liquidity cyclesA cycle is a recurring event (in the markets). : the trends in the global US$ liquidity has an impact on all markets

Every cycle has its value and only the sum of all of them enables a holistic view. Of great importance is the hierarchical structure::
(1) global liquidity of all market
(2) meta-cyclesA cycle is a recurring event (in the markets). of more than one market familiy (e.g. the precious metals are one market familiy)
(3) familiy cyclesA cycle is a recurring event (in the markets). (e.g. gold, silver, XAU and HUI are one family)
(4) individual cyclesA cycle is a recurring event (in the markets). (e.g. a cycle just for gold)
This is comparable with the different levels in Elliott wave counting, in both cases the rule is: the higher the accordance, the steeper the trend. A quadruple alignment can be compared to a wave 3 of 3 of 3 of 3 that produces a high trend pressure. The more contradictions between the 4 levels the weaker the trend. Conventional cyclesA cycle is a recurring event (in the markets). analysis is only working with the 4th level of individual cyclesA cycle is a recurring event (in the markets). and neglects the higher levels.

Practical cyclesA cycle is a recurring event (in the markets). analysis

Very important in the practical work is to assess the accuracy of cyclesA cycle is a recurring event (in the markets)., i.e. the variance. As the benchmark I use the ratio of the statisticalstandard deviation and the average cycle length. For a normal distribution you can expect 68.3% of all items to be found within +/- 1 standard deviation (SD) from the mean and 95.5% within +/- 2 SDs, i.e. 2 SDs is the yardstick to determine the maximum window, the remaining <5% are the rare outliers that can be neglected.

Cycles with a fixed polarity (that is low-low or high-high cyclesA cycle is a recurring event (in the markets).) normally have a SD of about 18-20% of the cycle length (15-25%), cyclesA cycle is a recurring event (in the markets). with a variable polarity (highs and lows are alternating) only 5-10%. More than 25% can hardly be used since the underlying cycle is very erratic and imprecise.

How do you find cyclesA cycle is a recurring event (in the markets).? At the beginning you should ask yourself which cycle you are looking for and how many instances you want. An important rule is to start at the key trend reversals (e.g. all-time highs or lows) as there are always all kinds of cyclesA cycle is a recurring event (in the markets). aligning. Then you may start with a visual inspection to see if something eye-catching is evident in the chart, if yes it has to be scrutinized.

Numerology is a great aid, too, as many cycle lengths are grouping around certain numbers. 3 examples:

  1. The 12 is the number of the earthly time structure (some believe it's a kind of a "time hypnosis" that is uncoupled from the Galactic resonance to the number 13)
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  2. The 9 is "indestructible" for the sum of digits of the multiples of 9 is always 9 (e.g. 3*9=27, 2+7=9). In the New Homeopathy of the Austrian physicist Erich Körbler the 9 symbolizes a completed cycle on a higher level, he used that knowledge for healing purposes, even a man that died thousands of years ago found in a glacier had the Körbler bar codes on his skin, so we can be sure this knowledge is very old and tested.
     ---

  3. Derived from the 9, the 40 also plays a major role (a full circle 360°/9=40°)

One can also use planetary cyclesA cycle is a recurring event (in the markets). as an input for the cyclesA cycle is a recurring event (in the markets). search, they are astronomically defined like the moon cycle (synodic 29.5 days, sideric 27.3 days).

If you already have some cyclesA cycle is a recurring event (in the markets). in a given market you may search for another cycle type of the same length, e.g. if you have a 4-months low-low cycle you will likely find a 4-months high-high cycle, too. Moreover, you can transfer a known number to another time level, e.g. if you have 16-week cycle there may be also 16-months cycle present. And finally, you can simply try the half or double cycle length, quite often you will find something useful.

The silver bullet certainly is to use higher sources of knowledge and to tap the subconscious mind, I received many inspirations and intuitions from above, some cyclesA cycle is a recurring event (in the markets). were "suddenly there" and all I needed to do was to perform the calculations.

 

Problems

The most frequent mistake when analyzing cyclesA cycle is a recurring event (in the markets). is to confuse historical with predictive probabilities, above all if you only have a small sample size (more in this article). This problem is most pressing for historical (very long-term) cyclesA cycle is a recurring event (in the markets). where even taking all data available into consideration may be unsatisfactory, e.g. the Kondratieff cycle with 50-60 years length. In this case there is no other solution than to use what you have but take care that you interpret the results with a grain of salt.

Insufficient precision is another problem. Frequently the nature of cyclesA cycle is a recurring event (in the markets). is misunderstood as the appropriate window (+/- 2 standard deviations) is not factored in, that often leads to the false conclusion that a cycle doesn't work. The confirmation of cycle reversals (via sub-cyclesA cycle is a recurring event (in the markets).) is often coming very late that's why you should ideally use another faster method to confirm market turns.

I also want to touch a problem that apparently isn't mentioned anywhere in the textbooks: the shape of the statistical variance of cyclesA cycle is a recurring event (in the markets).. At the beginning I implicitly misconceived that the distribution of the cycle lengths approximates by and large a Gaussian bell curve and performed the calculations on that assumption. However, I later realized that there are 2 completely different cyclesA cycle is a recurring event (in the markets)., those with one apex (roughly mirroring the bell curve) or two apexes which indicates that there is a dominant sub-cycle.

example stock markets: the intermediate-termintermediate term means a time horizon of 1-3 months. cycle (also known as the 20-week cycle or primary cycle) with a normal length of about 4.3 months has without doubt 2 apexes. While there are many instances with a duration of 4.1-5.1 months you also find numerous contractions of only 2.1-3.1 months which makes this cycle very wayward and hard to calculate, the standard deviation/ average length ratio is 25-30% which is very high and makes this cycle almost useless. Both apexes are app. connected by the Golden ratio (0.618). Here is the chart with the distribution for the S&P 500 1997-2004 (N=20 which is rather low, so the effect is probably exaggerated).

downloaded-f14b57dcb71474dfc192ce0a0b432a40-1232706445.img

 

Leading cycle analysts

At the end I want to mention some important cyclesA cycle is a recurring event (in the markets). analysts that I am partly corresponding with:

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