Many comments have come thanking me for demonstrating that there is order hidden within this chaos. Yet, the underlying question is fundamental – Why do cycles exist? I suppose the real answer is the same reason why we exist. Cycles are the divine blueprint from which everything is constructed. It is a complex structure, but everything within the universe is built upon this core model of cycles – birth – life – death.
When two people have a child, it is a merger of each person’s DNA. This is also how markets unfold. The exception is that they have thousands of parents being each market/economy around the globe. Hence, this is what I mean when I say everything is connected. The complex combination of global trends at each moment produces a slightly different combination of events. Therefore, history repeats, but the actors change. Thus, looking at how a revolution in Ukraine unfolds is indicative of how all uprisings unfold against various states.
There is group behavior which for example can be demonstrated by the US share market which is split (1) Dow = big international money, (2) S&P 500 = mostly domestic big money, and (3) NASDAQ = predominant domestic retail money. Each group interacts with the other, but they respond to events differently, which is why which one leads reflects the sentiment being international v domestic. Although there are cycles, the individual moves through their own cycle of life learning as we go. In the early stage, we are driven as a member of of the herd of sheep. As we mature, those of us capable of rising above the herd can look down and observe the group behavior. That small group is the upper cut of the DNA chain and can decide to be one of the group or strike out on their own as the individual and trade against the herd. Thus, some of us are compelled to watch other repeat the same cycle unable to change the course of events or history until enough rise up and thus the group then follows the select few.
Understanding this complex nature is in itself a fascinating journey. The US share market has been rising with the MAJORITY of people bearish. All we hear is how the crash will be any day now. Why? Because people do not comprehend how everything is connected and thus judge a book by its cover. Even domestic so-called professional traders get vertigo and cannot trade this type of market. At this year’s WEC, I will review how to trade this type of market which is altogether different from 99% of the markets in normal time.
Then you have gold. Here you have diehards who stand on their soap-boxes and every rally they proclaim this is finally it exactly opposite of the prevailing bearish sentiment in the stock market. It is important to be able to rise above this and observe objectively the group sentiment in each segment and how they function. The constant bearishness in stocks propell it to rise just as the perpetual bullishness in gold has propelled it to decline. The majority MUST always be wrong for that is the fuel that drives market movements.
Real bull markets, as we see in the US shares, never take place with the majority being bullish. What happens is that those who were skeptical finally come in for the Phase Transition at the end buying just before the highs and then they refuse to believe they were wrong and expect it to explode again any day. They tend to hold on to losing positions refusing to admit that they were the fools who rushed in. In the case of gold, all you need do is search what some of these people said for the 19 year bear market in gold after 1980 and you will see that their entire lives have been in anticipation of that Phase Transition that will last forever.
Cycles exist because the passions of humankind never change no matter the race, creed, or gender. We are all the same inside and we respond to our environment. The saying: Oh to be young again, but to known what I know today, reflects that learning curve. The youth know it all and as they grow older, they suddenly realize they do not know much of everything.
So cycles exist because this is how everything functions from weather to planetary movement and the cycle of life from birth to death. Your heart beats to a cycle and you wake in the morning to a cycle that ends when you are tired and must go to sleep. This is the divine structure behind absolutely everything right down to how a virus evolves to beat the latest drug we just invented to kill it. Life simple goes on because it is cyclical – not linear.
Eastern religions are cyclical based. They believe what was always returns. We tend to be linear in the West. However, those who read the Bible have often asked, why will God release Satan after 1,000 years? Is it not also describing a cycle?
Revelation 20:7-10: “When the thousand years are over, Satan will be released from his prison and will go out to deceive the nations in the four corners of the earth—Gog and Magog—to gather them for battle. In number they are like the sand on the seashore. …”