Wednesday, January 2, 2013

Kress cycle forecast for 2013

It’s time once again for our annual Kress cycle echo forecast and review for 2013.  For the benefit of those unfamiliar with a Kress Cycle “echoes,” these stock market patterns are based on the 6-year, 10-year, 30-year and 60-year rhythms in the equity market and have been invaluable in providing a rough guideline or “road map” for what to expect in the coming months.

Let’s start with a review of last year’s “echo” analysis. The Kress cycle echo for 2012 was based on the years 2006 (6-year rhythm), 2002 (10-year rhythm), 1982 (30-year rhythm) and 1952 (60-year rhythm). Based on an analysis of these four rhythms, here’s what I concluded in the Dec. 28, 2011 report:

“The first five months of 2012 will likely be characterized by greater than average volatility....This will create a level of choppiness to coincide, if not exacerbate, the market’s underlying predisposition to volatility owing to the eurozone debt crisis…the May-June 2006 stock market slide could be repeated in May-June 2012.  Our short-term trading discipline should allow us to navigate this volatility and there should be at least two worthwhile trading opportunities between [January] and the scheduled major weekly cycle around the start of June 2012.  From there, the stock market should experience what amounts to the final bull market leg of the current 120-year cycle, which is scheduled to bottom in October 2014.

“Keeping in mind that like snowflakes, no two markets are exactly alike, the Kress cycle echo analysis for 2012 tells us to expect a final upswing for stocks in the second half of the year with the first half of 2012 likely to be more favorably to the bears, especially if events in Europe are allowed to get out of hand.”

All in all, last year’s forecast wasn’t too far off the mark.  The anticipated May-June slide did occur and there was indeed a major cycle low around June 1, 2012.  The anticipated rally in the second half of the year materialized up until October, after which the market took another “correction” into November.  This is the only major part of the 2012 forecast our Kress cycle echo analysis failed to see.  (Although there was an October slide in the 60-year “echo” year of 1952, I chose to discount this factor in last year’s forecast).  In any event, the year 2012 was an overall winning year for the U.S. stock market as measured by the S&P 500 and as forecast by the 2012 echo analysis.

That was the year that was.  Now let’s turn our attention to the year that is, namely 2013.  The old saw that “No two markets, like snowflakes, are never exactly alike” should be kept in mind here as a disclaimer, but there is a cyclical basis for a similar pattern occurring this time around. In the past we’ve talked about the Kress cycle echoes which tell us that the stock market performance of any given year tends to loosely resemble the performance of the previous 6, 10, 30 and 60 years previous on an aggregate basis, with a special emphasis on the 60-year-ago period….

[For the complete 2013 Kress cycle forecast for the U.S. stock market, subscribe to the Momentum Strategies Report at the link below.]

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