Grand supercycle
Encyclopedia
A Grand Supercycle is the longest period, or wave, in the growth of a financial market as described by the Elliott Wave Principle
, originally proposed by Ralph Nelson Elliott
. Elliott speculated that a Grand Supercycle advance had started in the United States stock market in 1857 running to the year 1928., but acknowledged another interpretation that it may have been the third or even the fifth Grand Supercycle wave. However, these assignments have been reevaluated and clarified using larger historical financial data sets in the works of A. J. Frost and R.R. Prechter, and the start is now considered to be 1789, at which time the stock market data begin.
Like all Elliott Waves, Grand Supercycle waves are subdivided into smaller generations of waves. The next generation of smaller waves are those of Supercycle degree. Modern applications of the Wave Principle also describe waves of larger degree spanning millennial periods of time, such as the Millenium Wave.
Modern application of Elliott Wave Theory posits that a Grand Supercycle wave 5 is completing in the 21st century and should be followed by a corrective price pattern of decline that will represent the largest economic recession since the 1700s.
In technical analysis
, Grand Supercycles and Supercycles are often compared to the Kondratiev wave
, which is a cycle of 50 to 60 years, but these are in detail distinct concepts.
started in 1987 When that was proven incorrect it was later revised to be 2000 and then 2006.
Others view the 2000-2002 bear market in US stocks and 2000-2003 bear market in European stocks as being of lesser degree, such as Primary, Cycle, or Supercycle.
If a Grand Supercycle bear market started in US and European stocks in 2000 then the bear market in stocks and general economic decline should be more severe than the Supercycle bear market of 1929-1932, and could possibly be much more severe.
In Asia
the Japanese stock market the Nikkei 225
is still far below its late 1980s high of 38,957.44, reaching a 26 year low of 6994.90 in 2008 which is a bear market of Grand Supercycle scale. Other Asian indices such as the Chinese stock market the SSE Composite Index have dropped over 50% after reaching all-time highs in 2007, which is indicative of a bear market of at least Cycle scale being in progress.
During 2006-2007 the Dow Jones Industrial Average
made a new all-time high, this has been interpreted by some Elliott Wave analysts as indicating that 2000-2002 was not the beginning of a Grand Supercycle bear market. However as this new high was merely a nominal new high in US dollars, and not a new high when measured in ounces of gold other Elliott Wave analysts believe this new high to be 'phony'.
This later view is supported by the Global financial crisis of 2008, a major financial crisis being the worst of its kind since the Great Depression
.
analysis. Modern Kondratiev theory examines the role of leading technologies in creating long economic cycles. Although Elliot wave practitioners and other market analysts refer to Kondratiev waves or long economic cycles or surges, the economic literature generally does not use the term Grand Supercycle for any business cycles.
Although wave analysts have been predicting a long cycle downturn for a number of years based on the timing of previous waves, there is limited support in the Kondratiev cycle literature for any regular or periodic recurrence of future cycles, but spectral analysis of business cycle may suggest a 53-year cycle. A branch of Kondratiev wave analysis that has predictive power is that using the logistic function
which has been investigated by members of IIASA
in papers by Cesare Marchetti and Arnult Grübler's book on infrastructures, which has a chapter on Kondratiev wave cycles and notes a 55-year time between mid-points of infrastructures.
.
It should be understood that this is meant in relative rather than absolute terms, so that rather than the standard of living dropping to the lows of the Great Depression what may occur is simply many decades of economic stagnation.
However, if the termination of the current Grand Supercycle coincides with the termination of an Elliott Wave of greater degree, then the economic recession should be of a significantly greater magnitude than the previous Grand Supercycle collapse. This would be the case if the current Grand Supercycle is the 5th wave of the so called X-Wave or Millennium wave. beginning around 1000 A.D. with the end of the Dark Ages. This wave configuration is accepted by some Elliott wave analysts but rejected by others.
A controversial issue is whether the severe economic recession accompanying the termination of the current Grand Supercycle will take the form of either a deflationary depression or a hyperinflationary period. Robert Prechter has repeatedly stated that the collapse will take the form of a deflationary depression probably followed by hyperinflation. This is made clear in the following quotes from October 2006:
Elliott wave principle
The Elliott Wave Principle is a form of technical analysis that some traders use to analyze financial market cycles and forecast market trends by identifying extremes in investor psychology, highs and lows in prices, and other collective factors...
, originally proposed by Ralph Nelson Elliott
Ralph Nelson Elliott
Ralph Nelson Elliott was an American accountant and author, whose study of stock market data led him to develop the Wave Principle, a form of technical analysis that identifies trends in the financial markets...
. Elliott speculated that a Grand Supercycle advance had started in the United States stock market in 1857 running to the year 1928., but acknowledged another interpretation that it may have been the third or even the fifth Grand Supercycle wave. However, these assignments have been reevaluated and clarified using larger historical financial data sets in the works of A. J. Frost and R.R. Prechter, and the start is now considered to be 1789, at which time the stock market data begin.
Like all Elliott Waves, Grand Supercycle waves are subdivided into smaller generations of waves. The next generation of smaller waves are those of Supercycle degree. Modern applications of the Wave Principle also describe waves of larger degree spanning millennial periods of time, such as the Millenium Wave.
Modern application of Elliott Wave Theory posits that a Grand Supercycle wave 5 is completing in the 21st century and should be followed by a corrective price pattern of decline that will represent the largest economic recession since the 1700s.
In technical analysis
Technical analysis
In finance, technical analysis is security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume. Behavioral economics and quantitative analysis incorporate technical analysis, which being an aspect of active management stands...
, Grand Supercycles and Supercycles are often compared to the Kondratiev wave
Kondratiev wave
Kondratiev waves are described as sinusoidal-like cycles in the modern capitalist world economy...
, which is a cycle of 50 to 60 years, but these are in detail distinct concepts.
Possible Elliott Wave position of world stock markets
Some Elliott Wave analysts believe that a Grand Super Cycle bear market in US and European stocksStocks
Stocks are devices used in the medieval and colonial American times as a form of physical punishment involving public humiliation. The stocks partially immobilized its victims and they were often exposed in a public place such as the site of a market to the scorn of those who passed by...
started in 1987 When that was proven incorrect it was later revised to be 2000 and then 2006.
Others view the 2000-2002 bear market in US stocks and 2000-2003 bear market in European stocks as being of lesser degree, such as Primary, Cycle, or Supercycle.
If a Grand Supercycle bear market started in US and European stocks in 2000 then the bear market in stocks and general economic decline should be more severe than the Supercycle bear market of 1929-1932, and could possibly be much more severe.
In Asia
Asia
Asia is the world's largest and most populous continent, located primarily in the eastern and northern hemispheres. It covers 8.7% of the Earth's total surface area and with approximately 3.879 billion people, it hosts 60% of the world's current human population...
the Japanese stock market the Nikkei 225
Nikkei 225
The , more commonly called the Nikkei, the Nikkei index, or the Nikkei Stock Average , is a stock market index for the Tokyo Stock Exchange . It has been calculated daily by the Nihon Keizai Shimbun newspaper since 1950. It is a price-weighted average , and the components are reviewed once a year...
is still far below its late 1980s high of 38,957.44, reaching a 26 year low of 6994.90 in 2008 which is a bear market of Grand Supercycle scale. Other Asian indices such as the Chinese stock market the SSE Composite Index have dropped over 50% after reaching all-time highs in 2007, which is indicative of a bear market of at least Cycle scale being in progress.
During 2006-2007 the Dow Jones Industrial Average
Dow Jones Industrial Average
The Dow Jones Industrial Average , also called the Industrial Average, the Dow Jones, the Dow 30, or simply the Dow, is a stock market index, and one of several indices created by Wall Street Journal editor and Dow Jones & Company co-founder Charles Dow...
made a new all-time high, this has been interpreted by some Elliott Wave analysts as indicating that 2000-2002 was not the beginning of a Grand Supercycle bear market. However as this new high was merely a nominal new high in US dollars, and not a new high when measured in ounces of gold other Elliott Wave analysts believe this new high to be 'phony'.
This later view is supported by the Global financial crisis of 2008, a major financial crisis being the worst of its kind since the Great Depression
Great Depression
The Great Depression was a severe worldwide economic depression in the decade preceding World War II. The timing of the Great Depression varied across nations, but in most countries it started in about 1929 and lasted until the late 1930s or early 1940s...
.
Comparison to the Kondratiev cycle
Elliott Wave analysis is distinct from Kondratiev waveKondratiev wave
Kondratiev waves are described as sinusoidal-like cycles in the modern capitalist world economy...
analysis. Modern Kondratiev theory examines the role of leading technologies in creating long economic cycles. Although Elliot wave practitioners and other market analysts refer to Kondratiev waves or long economic cycles or surges, the economic literature generally does not use the term Grand Supercycle for any business cycles.
Although wave analysts have been predicting a long cycle downturn for a number of years based on the timing of previous waves, there is limited support in the Kondratiev cycle literature for any regular or periodic recurrence of future cycles, but spectral analysis of business cycle may suggest a 53-year cycle. A branch of Kondratiev wave analysis that has predictive power is that using the logistic function
Logistic function
A logistic function or logistic curve is a common sigmoid curve, given its name in 1844 or 1845 by Pierre François Verhulst who studied it in relation to population growth. It can model the "S-shaped" curve of growth of some population P...
which has been investigated by members of IIASA
IIASA
The International Institute for Applied Systems Analysis is an international research organization located in Laxenburg, near Vienna, in Austria. IIASA conducts interdisciplinary scientific studies on environmental, economic, technological and social issues in the context of human dimensions of...
in papers by Cesare Marchetti and Arnult Grübler's book on infrastructures, which has a chapter on Kondratiev wave cycles and notes a 55-year time between mid-points of infrastructures.
Magnitude and form of expected economic recession
A bear market of Grand Supercycle scale should be of sufficient magnitude to be accompanied by a severe economic recession. The last Grand Supercycle was terminated by the bursting of the South Sea Bubble and Mississippi Bubble in 1720. This was followed by a period of economic stagnation which lasted over 50 years, which is longer than the length of the Great Depression. If the Grand Supercycle theory is correct then the magnitude of the current recession should be of greater magnitude than the Great Depression, and possibly of greater magnitude than the severe economic recession from the 1720s–1770s that terminated the previous Grand Supercycle of the RenaissanceRenaissance
The Renaissance was a cultural movement that spanned roughly the 14th to the 17th century, beginning in Italy in the Late Middle Ages and later spreading to the rest of Europe. The term is also used more loosely to refer to the historical era, but since the changes of the Renaissance were not...
.
It should be understood that this is meant in relative rather than absolute terms, so that rather than the standard of living dropping to the lows of the Great Depression what may occur is simply many decades of economic stagnation.
However, if the termination of the current Grand Supercycle coincides with the termination of an Elliott Wave of greater degree, then the economic recession should be of a significantly greater magnitude than the previous Grand Supercycle collapse. This would be the case if the current Grand Supercycle is the 5th wave of the so called X-Wave or Millennium wave. beginning around 1000 A.D. with the end of the Dark Ages. This wave configuration is accepted by some Elliott wave analysts but rejected by others.
A controversial issue is whether the severe economic recession accompanying the termination of the current Grand Supercycle will take the form of either a deflationary depression or a hyperinflationary period. Robert Prechter has repeatedly stated that the collapse will take the form of a deflationary depression probably followed by hyperinflation. This is made clear in the following quotes from October 2006:
JIM: If you were to make your case for deflation right now, what would be the key factors supporting that view?
BOB: The credit bubble: the fact that we do not have currency inflation as much as we have credit inflation. And credit bubbles have always imploded. The amount of dollars out there that are greenbacks – actual cash – is compared to the dollar value of credit instruments. So in my view the Fed is utterly powerless to prevent the ultimate deflation of the credit bubble. And some people say, “Well, they can print money.” Fine, that would just make the credit bubble collapse faster as soon as bond holders realize that’s what they were doing. There’s no way out of it. So that’s the argument.
...
BOB: Well, the hyperinflation part is a pure guess based on politics. It has nothing to do with reading markets. I think the markets are telegraphing deflation, and I’m very confident about that. Hyperinflation to me is going to be the natural political response. I mean these people in Congress are so irresponsible – except to themselves and their families, of course. They always get reelected so they’re doing that correctly. I mean, it’s working for them as individuals but it’s not working for the country. Anyway, to save their own skins I think the most likely thing is that they will turn to the Treasury, whether they keep the Federal Reserve System or not, and say, “Let’s print, let’s get the machines going and print those greenbacks and spread them around.”
Controversy about the Elliott Wave Grand Supercycle
Many controversies surround the concept of the Grand Supercycle:- Stock transactions did not occur during the first years of the United States and price data is thus not available. The notion of the Grand Supercycle was thus implied by R. N. Elliott by concatenating gold prices, British stock market prices, and later U.S. stock market prices, as the U.S. economy surpassed the U.K. It is not clear that this methodology is scientifically robust.
- The hypothesised Grand Supercycle is conjectured to span more time than a human life, which some say means it cannot exist. Followers of Saeculum TheorySaeculumA saeculum is a length of time roughly equal to the potential lifetime of a person or the equivalent of the complete renewal of a human population. The term was first used by the Etruscans. Originally it meant the period of time from the moment that something happened until the point in time that...
take this view and align instead around a belief that defined sequences of generations relearn approximately the same lessons as their forebears. Similar ideas can be found in the BibleBibleThe Bible refers to any one of the collections of the primary religious texts of Judaism and Christianity. There is no common version of the Bible, as the individual books , their contents and their order vary among denominations...
. The Saeculum might map to the Kondratiev cycle. - If a social cycle of such large degree does indeed exist, then present-day scientific and economic understanding is insufficient to explain how it would propagate or what causes it, or even the smaller-degree waves that the theory suggests.
- If financial and social trends exhibit a constrained, patterned architecture then there would be wide-reaching ramifications in terms of the modern-day Western belief in free willFree will"To make my own decisions whether I am successful or not due to uncontrollable forces" -Troy MorrisonA pragmatic definition of free willFree will is the ability of agents to make choices free from certain kinds of constraints. The existence of free will and its exact nature and definition have long...
, thought inspired by the Age of EnlightenmentAge of EnlightenmentThe Age of Enlightenment was an elite cultural movement of intellectuals in 18th century Europe that sought to mobilize the power of reason in order to reform society and advance knowledge. It promoted intellectual interchange and opposed intolerance and abuses in church and state...
and its belief in the supremacy of reason, predestinationPredestinationPredestination, in theology is the doctrine that all events have been willed by God. John Calvin interpreted biblical predestination to mean that God willed eternal damnation for some people and salvation for others...
and the nature of the relationship between the individual and society. - The idea of a Grand Supercycle bear market implies that mankind will never learn from its past mistakes, or become self-aware in a macro-economic sense. The historical study presented in David Hackett FischerDavid Hackett FischerDavid Hackett Fischer is University Professor and Earl Warren Professor of History at Brandeis University. Fischer's major works have tackled everything from large macroeconomic and cultural trends to narrative histories of significant events to explorations of...
's The Great Wave (Oxford University PressOxford University PressOxford University Press is the largest university press in the world. It is a department of the University of Oxford and is governed by a group of 15 academics appointed by the Vice-Chancellor known as the Delegates of the Press. They are headed by the Secretary to the Delegates, who serves as...
, 1999), however, presents a meticulously argued case that the periodic crisesCrisesCrises is the eighth record album by Mike Oldfield, released in 1983. Oldfield's well known hit "Moonlight Shadow" appears on the album.- Album analysis :...
in human history are becoming steadily less volatileVolatility (finance)In finance, volatility is a measure for variation of price of a financial instrument over time. Historic volatility is derived from time series of past market prices...
, which suggests that some kind of species-wide learning is occurring. This could be consistent with Rupert SheldrakeRupert SheldrakeRupert Sheldrake is an English scientist. He is known for having proposed an unorthodox account of morphogenesis and for his research into parapsychology. His books and papers stem from his theory of morphic resonance, and cover topics such as animal and plant development and behaviour, memory,...
's controversial theory of "morphic resonance."
See also
- Market trendsMarket trendsA market trend is a putative tendency of a financial market to move in a particular direction over time. These trends are classified as secular for long time frames, primary for medium time frames, and secondary for short time frames...
- Economic cycles
- Business cycleBusiness cycleThe term business cycle refers to economy-wide fluctuations in production or economic activity over several months or years...
- David Hackett FischerDavid Hackett FischerDavid Hackett Fischer is University Professor and Earl Warren Professor of History at Brandeis University. Fischer's major works have tackled everything from large macroeconomic and cultural trends to narrative histories of significant events to explorations of...