Background: In a recent analysis of possible “long waves” in the real-time
data of the DJIA from 1906, we found that not only did these waves exist but
there was a strong correlation between these cycles and the broad response of
the DJIA [i.e., the Crash of 1929 www.urbansurvival.com, “The Late Great Dow
Jones” written in Oct 2002] in which the DJIA is currently repeating its
waveform from the 1929-1933 as postulated by Mr George Ure at his website.
I was curious to see whether the Nikki Index showed any such “waves or
cycles” in its real-time data since the Nikki Index has “crashed” from a high in
1990 of 38,000+ to its current
close of 7868 as of March 13, 2003. We took the weekly closing of the Nikki
Index from 1984 thru March 2003 and ran a bandpass filter on the data. The
results clearly showed several long waves or cycles at 165, 310 and 450 weeks as
well as a number of shorter cycles at 36, 48, 69, 82, and 111 weeks which had
much smaller amplitudes.
Results: Chart 01 shows
the longest waves which were found in the Nikki Index over the period from 1984
thru 2003. It clearly shows that during the period from 1990 thru 1992, these
waves all reached a peak together in 1990-1991 and came down together
(in-phase). If these were the periods of ocean waves, this phenomena would
produce a large “rogue wave”, perhaps this is the phenomena being described by
Mr Jim Puolava at www.financialsense.com in describing
the coming “Perfect Financial
Storm”.
There exist very similar waves in the DJIA real-time as well as in the
NYSE Composite Index and S&P 500 Index and most other World Indices. These
long wave cycles are also in the commodity data, bonds, and major currencies of
the world. Such waves have been noted to go back in commodity data for hundreds
of years probably based [in part] on the actual weather seasons.
The Nikki was predicted through 2006 by
assuming these waves would continue with their current wwave heights. While this
assumption will not strictly be true, the resulting waveform would give a feel
for the possibilities to watch for in the future. The result is shown in Chart
02. This waveform suggests a possible significant rally in the Nikki Index in
either late 2003 or early 2004 leading to a “double top” thru summer of 2006.
This is a result of the long waves bottoming in late 2003 and starting back up.
Chart 03 is a pure speculation which addresses the question: “Can these
waves add together again in the future and when this could happen? This graph
shows the possible behavior of the Nikki Index from 2007 through 2011. It shows
a disturbing trend in these cycles whereby they will add together again in mid
to late 2007 which would crash the Nikki Index if it continues it the current
downtrend. After another “rally attempt”, the Nikki Index is not predicted to
significantly recover again. Many other World Indices also show this major
downtrend from mid to late 2007 thru 2008.
Is it possible an economic “Rogue Wave” does exist – ask the Japanese?
Such an occurrence actually happened to the DOW/NASDAQ in 1929 and again in 1999
to NASDAQ.
Summary: Beware of the Super Mayan Bear after June 2007 when it again awakes from hibernation. Bears love salmon and it plans on a coming “sushi snack”! The Mayan Bear in your review mirror maybe closer than it appears.