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10 Market Cycles Explained in One New Infographic That Simplifies Your Investing


Contents:

  • Introduction: Learn about market cycles and their importance in trading and investing.
  • Infographic Breakdown: Our market cycles infographic simplifies investment decisions and can help you make more money.
  • Kill Zones: Learn about the best times to trade, the relevance of "kill zones" and why certain days of the week matter.
  • Sector Rotation: A primer on how different business sectors interact with market cycles and how to use this knowledge to your advantage.
  • Bitcoin and Emotion Cycles: Discover the 4-year Bitcoin cycle and the emotional cycle of the market and how to navigate them.
  • Economic and Generational Cycles: Explore the larger economic trends and how generational shifts influence the market.
  • Cycles Working Together: Learn how different cycles interact with each other and how to use this knowledge to enhance your trading and investment strategies.



Introduction To Market Cycles:

A trader's goal is to profit from trading and build wealth from smart investing. With this ability, trading and investing is the most rewarding, time-saving, location-independent businesses possible. However, traders and investors are always hunting for an "edge", i.e., an advantage, that helps them perform better in the market.

Any fundamental edge you get makes all the difference; this cheatsheet can give you that edge.

This cycle cheatsheet started with my curiosity about seasonality, but I found it hard to keep track. Reference EquityClock.

In the Level 2 School Program at TRI, we learn about Sector Rotation, and Brian often talks about it, referencing the stockcharts.com page to show how it works.

Then there are short-term daily Kill zone, bitcoin and emotional cycles, and long-term generational and money cycles.

The question is...


How do all these cycles connect?

This question ultimately led to this cheatsheet. I show all the cycles in a detailed infographic explaining the cycles and their connections.

At the end of this blog, there’s a link to join the TRI community where you can download the full resolution cycles infographic cheatsheet (poster size).


Market Cycles Infographic Breakdown

Now I'll show why this cycle infographic is important for you as an investor trying to make money from the market.


Simplify The Market Cycles

The above images will give you all the information you need to understand market cycles. However, it’s not as clear as it can be.

This cheatsheet aims to simplify these complicated cycle concepts and show it all on one simple page.

It shows the super long-term money or generational cycles, to the business and stock market cycles, and then yearly seasonality cycles.

Here are all the cycles and market industry sectors in the infographic.


Let’s start small with the TRI Venn Diagram

It starts with TRI in the center - the Venn diagram shows an overlap of Fundamental Analysis (what this cheatsheet is all about) and Technical analysis (analyzing charts). The Rational Investor is aware of both schools of thought and makes investing decisions where they overlap. Learn more about the TRI rules for profitable trading in this blog post here.



Market Kill Zones

Market kill zones are times the market is about to open or close for a specific country. On this chart we’ve tracked London, New York, Sydney, and Tokyo so you can visualize the markets opening and closing around the world. The infographic clock is on GMT (London time), so consider that during the summer (British Summer Time) the clock moves forward by one hour for the UK.


Weekly Cycles

The markets close on Saturday and Sunday (grey color); the worst trading days are Monday and Friday. The options expire on the Third Friday of every month, so traders often avoid that volatile event. Tuesday to Thursday are generally the best trading days (green), and most traders will stick to these days to do most of their trading.


Seasonality Cycles

Visualizing seasonality was one of the harder elements of understanding cycles. The only visual I had was the helpful yet slightly complicated Equity Clock, and it didn't incorporate other cycles. I wanted it all on one simple graph.


I made a circular pie chart of the entire year to fit this into the infographic. The market industry sectors are shown as bars going around the circle with the month's start and end dates numbered.

We talk in more detail about seasonality in the TRI community and the TRI School. You can download the full-resolution infographic in the TRI library along with tons of other cheatsheets, trading setups, and custom TradingView indicators.


Sector Rotation

During various stages of the business cycle, different sectors are stronger and more invested than others. This is a concept taught in the level 2 program (requires Level 1 education) and Brian talks about it all the time during live Daily Brief shows in the TRI Community.


The Business cycle splits into six sections broken down into four quarters. Here are the four quarters and six sections broken down.

  • Full Recession
  • ​Early Recovery
  • ​Full Recovery
  • ​Early Recession

And the six sections outline whether bonds, stocks, or commodities are generally moving up or down in this part of the cycle.

  • Bonds up, stocks and commodities down
  • ​Bonds and stocks up, and commodities down
  • ​Bonds, stocks, and commodities up
  • ​Bonds down, stocks and commodities up
  • ​Bonds and stocks are down, and commodities up
  • ​Bonds, stocks, and commodities down

Overlaying the business cycle is the Stock Market cycle, including sector rotation. The Market cycle leads the business cycle, so the tags for the four stages are slightly earlier than the four stages of the business cycle. For the market cycle, the stages are:

  • Market Bottom
  • Bull Market
  • ​Market Top
  • ​Bear Market

I simplified the original charts from StockCharts and the 6-stage business cycle into the circle design so you can understand it from the perspective of all other cycles.


Bitcoin & Emotion Cycle Chart

Bitcoin has a clear 4-year cycle because of the halving event and the way it follows the general business cycle, which is similar. The Emotional cycle follows a similar timeframe, based on the Nasdaq bubble shown in the Wall Street cheatsheet below.

The next Bitcoin halving is in 2024. In 2023, we are in the bottoming phase of the cycle. To learn more about why 2023 is a bottoming year, check out this blog post explaining the Benner cycle and 7 other studies that suggest this year is a bottom. You can use this cheatsheet to find our current position in the Bitcoin cycle.


The four phases in the Bitcoin cycle are as follows:

Bottom: This phase marks the bottom of a new bull market, it can be extremely messy and lay traps on both sides for investors. This is the time to DCA (dollar cost average) into Bitcoin and build your positions for the coming bull markets.

Consolidation: During the consolidation phase, Bitcoin market conditions often range, with big violent moves to both the upside and the downside.

Blow-Off Top: The most bullish phase of the Bitcoin bull market where euphoria takes over and the price can go booming to new unreached highs.

Hangover: After the blow-off top, Bitcoin has to come back down to earth and often corrects 60-80 of the entire move. During this phase, market sentiments are extremely negative as the market heads into anxiety, denial and panic.

The next Bitcoin halving is in 2024. In 2023, we are in the bottoming phase of the cycle. To learn more about why 2023 is a bottoming year, check out this blog post explaining the Benner cycle and 7 other studies that suggest this year is a bottom. You can use this cheatsheet to find our current position in the Bitcoin cycle.


Wyckoff Market Cycles

The Wyckoff accumulation and distribution cycle is a four-phase model that unveils the price movement of stocks and financial instruments. The phases are as follows.

Accumulation phase: The first phase is accumulation, where smart money accumulates shares at discounted prices, and the price trades in a sideways range.

Markup phase: The markup phase follows with a strong uptrend as demand exceeds supply, causing prices to rise rapidly.

Distribution phase: In the distribution phase, smart money starts selling their holdings to the public, and prices may consolidate or trade sideways.

Markdown phase: The markdown phase occurs when selling pressure overwhelms buying pressure, leading to prices decreasing.

You can read more about the Wyckoff market cycle in this helpful Investopedia article, and we also talk about it in another blog post at TRI, talking about 7 studies that forecast a bottom in the 2023 stock market.


Long-term cycles

We talk a lot more about these cycles in the TRI School and on the Daily Brief shows in the TRI Community. They are more complex and we can’t fit everything into one blog post. To summarize, however, let’s quickly examine these cycles.


The Economic Cycle

The economic cycle is really two business cycles. One is stronger and the other consolidates sideways. Over time, you get a rising direction with swings to the upside and downside.

Ray Dalio talks more about the economic cycle in his "How does the economy work" video. He describes the market as following a productive curve to the upside, with large swings for the interest rate cycle and smaller swings for the business cycle. Here’s how he describes the market in a simple chart form. Watch the full 30m documentary on YouTube.


Generational & Money Cycle

Brian talks a lot about the generational Fear & Greed Cycle, which is 35 years, split into two 17.5-year halves. The even longer-term money cycle, also known as the Interest rate cycle or the debt cycle, is around 80 years. The next greed cycle peak comes in around 2035 and the next interest rate money cycle pivot is around 2040.


Cycles Working Together

In the bottom left of the cheatsheet, you’ll see four Market cycles shown a simple sine waves. When cycle peaks and troughs align, you get a powerful signal, and when they move in opposites, the market can be confusing.


The Full Market Cycles Cheatsheet

To better understand market cycle theory, enroll in the TRI School, where we discuss it in more detail. Click here to learn more about the TRI School and enroll.

You can also download the full-resolution high-quality print version of the market cycles cheatsheet from the TRI library. Click here to join the TRI community and get access to the market cycles cheatsheet.

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