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Friday, November 19, 2010

Armstrong and Brenner cycles

It has been a while since I have looked at the Armstrong and Brenner cycles. Starting with the Armstrong economic cycle (the chart above). It can be seen that the economy should peak in February 2007 (The February 24.th to be precise). Projecting that over to the equity market, we know that they peaked in late October 2007. The economic down cycle should continue to April 19.th according to Amstrong.

Looking at the Brenner Cycle (see the chart below - Sorry for the quality, but it's an old handdrawn chart, but it should last my lift time or at least as long as I'm trading...)
The Brenner Cycle shows that we should see a top in 2010 followed by a decline into 2011.
According to the Brenner Cycle chart, the 2011 should not be a panic low, but as we saw in 2008-2009 the decline still could be very severe.

An other important issue is the risk of an inversion of the cycle. There is no telling if a inversion will be seen, but we saw an cycle inversion in March/April 2009 (probably because of FED's QE1). The risk of a new inversion (this time negativ for the economy) is obviouse, but not a giving case. No matter if an inversion will be seen or not, the end of 2010 and the beginning of 2011 could be a major disappointment for many investores.


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