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The Primary Trend (The Four Year Cycle)

The primary cycle is simple, yet profound. And once you learn to recognize it, you will never again finding yourself vacillating daily with the single day rallies and declines, wondering "Is this a bull market or a bear market?" That basic cornerstone will always be at the very center of your trading strategy.

Chart courtesy of StockCharts.com

The Primary Trend-Bull or Bear Market

The Primary Cycle, AKA the bull market/bear market cycle, AKA the 4-year cycle is the cornerstone of the successful market trader, because it defines the primary direction of the market. Over the years, bull markets have averaged 2.5 years in length, bear markets 1.5 years, though these numbers are just that- averages, and some primary bull markets or bear markets have been somewhat longer, some much shorter. But the propensity for the primary cycle to bottom in the mid-presidential year (1950, 54, 58, 62, 66, 70, 74, 78, 82, 86, 90, 94, 98, 2002, 06, 2010) has been uncanny, as shown below. Once one recognizes that pattern on the charts, it all starts to make sense....and come into clear focus. When this trader becomes conscious of the primary trend in real time, his trading performance is likely to improve exponentially. He immediately has a massive trading advantage over his competition, "the crowd". Context is everything.

As we write this in late 2009,we are  smack dab in the middle of a primary bull market at just over 1000 on SPX. Yet millions of traders worldwide, and talking heads on CNBC, on Bloomberg, in the Wall Street Journal, and on trading message centers everywhere are talking about "double dips" and new lows below 666 SPX. But that's all it is - Talk. If you understand market cycles, you have the huge advantage over these millions of traders and self apointed "experts"- the advantage of knowing that we are in and will continue to be in a bull market well into 2010. You will recognize this rally for what it is....a genuine bull market. The beauty of it all is that when you choose to buy, millions of willing "bagholders" are only too happy to take the sell side of your trade. Why? They sell because they are clueless about the Primary Cycle. They only "know" what the talking heads are telling them about "double dips" and what they "feel" about the market. 

Understanding of the primary cycle alone is enough to distinguish market winners from the herd of market losers. In a zero sum game, each new level of understanding puts you closer to the top 1% who make 99% of the stock market profits!