So with the advent of global QE, and zero interest rates, have central banks unlocked the key to perpetual bull markets? Let’s just say, I doubt it.

They have managed to stretch some of the multi-year cycles, and hold off the bear much longer than most have anticipated, but I don’t think they have discovered the secret to infinite prosperity.

As I said, the implementation of global QE has stretched some of the longer term cycles, and that is the first thing I’m going to explore in this article. Prior to 2000 there was a very clear four year cycle in the stock market. Roughly every four years stocks would move down into an exceptionally vicious decline, usually associated with either a recession, or some kind of financial debacle.

four year cycle lows a labeled

After 2002 central banks, in their hubris, decided that they could abort the normal business cycle by adjusting interest rates to zero and printing an infinite amount of currency units. At that point the four year cycle in the stock market morphed and evolved into a 7 year cycle.

seven year cycle

As you can see in the next chart, it’s getting very late in this seven year cycle, so we can probably expect the top sometime this year.

current seven year cycle

From this point on I’m going to convert to the chart of the NASDAQ as technology is driving this bull market, and the chart of the NASDAQ will tell us when to expect the top.

For more than a year now I’ve been saying that this bull market would not end until the NASDAQ at least retested the March 2000 highs at 5132. The perma bears that have been trying to call a top for years just don’t understand how major bull markets top. They almost always top on a breakout. Take the top in 2007 for instance. Notice how the market initially tested the 2000 high in the summer of 2007, and then printed a final top on a marginal break out above the old high (major bottoms also form in this pattern).

tops and bottoms

The big money institutions manufacture these topping and bottoming patterns as it gives them a breakout to sell into at a major top, and a breakdown to buy at a major bottom. Understanding how big money constructs tops and bottoms is critical in preparing for the next bear market. 

Given the fact that we are now six years into this bull market with the expectation for one of those seven year cycle lows sometime in the spring or summer of next year, then we can look at a chart of the NASDAQ and come up with a game plan for exiting this bull market. I’m guessing sometime over the next 2-4 weeks we’re going to get that retest of the all time highs, or at the very least, a retest of 5000. To be followed by a sharp intermediate degree decline.

NASDAQ  5100 top

The bottom of the next intermediate cycle low in May or June  is probably going to be the last great buying opportunity on the long side until 2016 (there is a lower probability scenario where the market just continues down into that intermediate cycle low over the next 2-3 weeks). As stocks come out of that yearly cycle low sometime this summer, this will be the period where the big-money banks manufacture a breakout to sell their positions in preparation for the move down into that seven year cycle low next year (economic conditions are already starting to weaken). We want to ride on their coattails for this last move back up, and then hop off the train before it goes over the cliff and the market starts down into its seven year cycle low sometime next fall.

Final seven year cycle top

At this point it’s too late in the seven year cycle to expect a sustained breakout above the all-time highs, so I think we should assume that that major resistance level is likely going to cap this bull market.

NASDAQ resistance

Now what can we expect at a seven year cycle low you ask? I think I can say with a fair bit of confidence that the S&P will break the multiyear trend line, and likely retest the 2000 & 2007 highs. The bears will be calling for the end of the world, and a move back down below 666 by this time.

seven year cycle low

I think I can also say with a great deal of confidence that the seven year cycle low is not going to come anywhere close to the 2009 low. Instead I think it is going to set up the final bubble phase of this bull market, and that bubble phase will be driven by biotech. This should be very similar to how the four year cycle low in 98 set up that final parabolic run to the 2000 top.

biotech bubble phase

And while I think the next phase of the secular bull market in gold will likely begin at that bottom in 2016 I don’t expect it will really gain much traction until the biotech bubble bursts.

So while I think bulls can make some good gains this year if they play the intermediate cycles correctly, I also think 2015 is the year to start preparing for the next bear market.


  1. mike miller

    I’m surprised you said economic conditions are weakening because I believe you have been fairly adamant the economy was doing pretty good and nowhere close to a recession (something I completely disagree with) but it’s reassuring to hear those words from you that things are slowing 🙂

    1. gary Post author

      None of the economic data is suggesting anything close to a recession yet. And we may go through the 7 year cycle low without a recession, but earnings are down about 14% this quarter so we are slowing.

  2. TraderPL

    Very interesting thesis Gary, What are your thoughts on USD and currencies as they are playing a big role currently , I am curious how you think the dollar will play out during the initial stages and also how Fed actions including rate hikes fit into your predictions.

  3. mike miller

    I may have missed something … if the top is 5100 that wouldnt give biotech any chance of going parobolic & having 100% upside from here.

  4. P Lo

    This weekend was when I read the most bearish commentaries via blogs that i’ve ever read over the past few years. Not 1 bullish article!!! Markets usually where its least expected.

  5. Jonathan

    30 years ago when I was in college, an XT PC was selling for $800 in Radio Shack. Today, people can buy a PC for $800 which is maybe a million times more powerful than the XT machine. It’s truly amazing how fast the technology has improved. Consumers get more and more value for the same price. In the meantime, tech companies make good profits. It’s a win-win and it can last. I respect tech and hope it continues to prosper.

    1. gary Post author

      I think it will drag the rest of the market with it, maybe not parabolic, but biotech is where the story is. like the personal computer in the 80’s and the internet in the 90’s. It’s where the innovation is at and it has a huge customer base in the baby boomers.

  6. azo

    Gary: what is your “prediction” for EURUSD, i mean final target, 1:1 or you think its possible that we could see 0.9 or something ?

    EURUSD should reach final bottom at the moment of top in stock market or later ?

    1. gary Post author

      Hard to say. At least to parity with the dollar and maybe even back to 80 on the euro index.

  7. Sooze

    If the Fed leaves in the word ‘patient’ this week, do you still see a pullback beginning in April-May, or will that delay it?

    1. gary Post author

      My best guess is patient means the dollar starts to correct for real into an intermediate degree decline. Stocks are released to at least test nasdaq 5100.

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