Seizure Getting More Frequent

CYCLES OF BAG ...

STOCK MARKET CYCLES

Before attempting to understand the cyclical nature of the stock market, let us focus first on the markets.

last between six and twenty years. In the twentieth century have seen it six, equally divided between upward and downward. Important to know which one is to operate: the strategies will be different.
Charles H. Dow, the founder of the Wall Street Journal, and a great observer of the dynamics of financial markets in his study identified three major scales or cyclical trends (Trend) in equity markets, which we have already spoken in the "Getting Started".

We find the primary trends that are large movements upward or downward which usually have a duration of between 4 and 6 years.
usually produces a downward trend to lower prices of equity assets of at least 40%.
In the United States in the last century there was evidence of at least two major bear market. The first one that runs from 1929 to 1938 and the second from 1969 to 1974. The same century saw three phenomena of panic selling that is, those of 1916, 1929, 1987.
trends or secondary medium, called "corrections" to intervene during the main stages of the bull or bear markets. These phases are not to affect the main trend in place. Normally, these movements have a duration ranging from a few weeks to several months.
Finally, the minor movements are short-term trends that last, usually about one to several weeks.

consider not so much the movement defined by Charles H. Dow but those who are called secular trend, namely that those movements have a long service life between 6 and 20 years. The important thing however, when one studies the phenomena and must somehow categorize them in some form, you do not get caught in the pure semantics of their definition, as in the case of the primary markets, secondary or cyclic, but rather should try to understand the real reasons for their genesis and evolution over time.

last century, the U.S. stock market can be observed the following cycles secular
1. bear market, 1906 - 1921 lasted 15 years;
2. bull market in 1921 - 1929 period 8 years;
3. Bear market 1929 - 1949 lasted 20 years;
4. 1949 -1966 bull market lasted 16 years;
5. Bear market 1966 - 1982 lasted 16 years;
6. bull market in 1982 - 2000 which lasted 18 years.

The impact of two cycles - bull and bear - on long-term returns of an investment is very large, and return you to the following table to help you understand the cyclical nature of markets, ultimately, that the law for each descent in the elevator, followed by a climb up the stairs, and it is there that the financial geniuses like W. Buffet going to position themselves with huge amounts of capital.



Morgan Stanley Composite Index World