The 9-Month Cycle

The  most important cycle in my work is the 9-Month Cycle. The 9-Month Cycle goes by other names -- the 40-Week Cycle, the 39-Week Cycle, and the 8.6-Month Cycle, to name the ones I can think of at the moment. A lot of people follow it, and it is, I have come to believe, the most important cycle for use in intermediate-term market forecasting, because it helps us plan for and quickly identify the most important declines and rallies that we will encounter within the course of a year. Even if you are a short-term trader, it is essential that you be aware of the progress of the 9-Month Cycle so that you will be in tune with next higher trend.

The illustration above shows the basic structure of the 9-Month Cycle. As you can see, it consists of two 20-Week Cycles, labeled as "Phase 1" and 'Phase 2". Likewise, the 20-Week Cycle consists of a Phase 1 and 2 10-Week Cycle.

The most powerful rally during the 9-Month Cycle will normally occur during the first three months of the cycle as all three nesting cycles are combined in a united upward move. Conversely, the period when the market is most vulnerable to a significant decline is during the last three months of the cycle when all three cycles are moving downward together into their final troughs.

In a bull market the 9-Month Cycle crest  normally occurs in the sixth to eight month in the cycle (right translation), and in a bear market the crest should be expected in the second or third month of the cycle (left translation).

In addition to the cresting of the 9-Month Cycle, the next most significant event is the cresting and completion of the Phase 1 20-Week Cycle. This can materialize as a minor price correction or consolidation in a bull market, but in a bear market it will likely coincide with the cresting of the 9-Month Cycle.

Knowing this basic 9-Month Cycle structure, we can consider that we are at the least risk establishing new long positions during the first three months of the cycle, and the greatest risk of decline comes in the last three months of the cycle. The three months in the middle is a time when caution should be exercised -- it can present risk as the Phase 1 20-Week Cycle rolls over into a trough, and it also can present new opportunity as the Phase 2 20-Week Cycle begins to move up.

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