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115 CFA
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115.100.06.06 Portfolio Management - Reading 56 - 6. Cycles

6. Cycles

f. explain how technical analysts use cycles;

How do technical analysts use cycles?
Many technicians use various observed cycles to predict future movements in security prices.

What are Kondratieff waves?
Kondratieff waves are described as regular, sinusoidal-like cycles in the modern (capitalist) world economy. Averaging fifty and ranging from approximately forty to sixty years in length, the cycles consist of alternating periods between high sectoral growth and periods of relatively slow growth.

What cycle does real estate seem to follow?
Real estate prices seem to follow an 18-year cycle, with a short recession at the mid-point of each cycle and a longer recession at the end-point.

What is a decennial pattern?
The decennial pattern is the pattern of average stock market returns broken down on the basis of the last digit in the year.

What is the presidential cycle?
The presidential cycle states that U.S. stock markets are the weakest in the year following the election of a new U.S. president. According to this theory, after the first year the market improves until the cycle begins again with the next presidential election.


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