ChartWatchers

THE 9-MONTH CYCLE

Chip Anderson

Chip Anderson

President, StockCharts.com

We are currently expecting a price low associated with the 9-Month (40-Week) Cycle, but let's first review some cycle basics.

The vertical lines show the location of all Nominal 9-Month Cycle troughs since 1996. The normal expectation is that the price index will arc from trough to trough, but sometimes other forces override normal cycle pressures, as happened in 1999 and 2000 when the market was transitioning from secular bull to secular bear. Because we are depicting "nominal" cycle projections, all the lines are of equal distance from one another, and they show where the cycle trough is assumed to be located. In other words, we believe that cycle periodicity is consistent, but price movement doesn't always conform to the cycle ideal.

The price crest associated with the current 9-Month Cycle occurred in the first quarter. Early tops are often followed by severe declines; however, the market entered a consolidation pattern instead. It appears that the price low for the cycle occurred in August, and that the current retracement toward that low could be a successful retest which coincides with the cycle trough, which is due now.

Bottom line is that we're looking for an important price low associated with the cycle trough, but that low can arrive a month or more on either side of the projected date. Assuming a successful retest, the cycle structure suggests that a rally out of the cycle trough could result in prices finally making a breakout from the trading range. However, at this writing, we have negative readings on other indicators, and there is considerable downside risk until the retest is complete. While we wait, let us be reminded that the cycle could run long by several weeks, in which case the August lows would be vulnerable.

Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of StockCharts.com into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More