Written and Published by:

Michael S. Jenkins

STOCK CYCLES FORECAST

P.O. Box 652 Cathedral Station PO, New York, N.Y. 10025-9998 WWW.StockCyclesForecast.com Volume 26 Issue 12
__________________________________________________________________________________________________
January 7, 2011 Dow 11,697

Pushing On A String

Historical precedent shows that secular bear markets have rally phases that last only two years at most
before an intervening nine month, to two year decline sets in. In the last issue I showed a few of the two years
up, two years down patterns and below is another way to look at it counting the calendar days from the last bull
market high which as of the date of this letter is approximately 1184 days from October 11, 2007.

The 'red' horizontal lines above show these 1184 day periods and what happened just after that.
Stock Cycles Forecast January 7, 2011 Page - 1 -
 Because humans are destined to repeat their history, they are also destined to rationalize why 'this time it's
different.' They will tell you the economy is finally recovering so nothing bad will come for years, or earnings
are finally improving and P.E.'s low, cash flow good, the Euro panic over etc., etc., etc. Of course it could be
just as easily said, 'sell on news', Christmas sales were a onetime aberration, mortgage losses will bankrupt the
banks again, California, Illinois, NY and the rest will go under by March, the rising rates will choke off the
economy, etc., etc., etc.
Cycles do exist and they repeat and all the rational thinking about why stocks should be bought or sold are
always the same argument at both the bottoms as well as the tops. What was the reason people bought for the
past two years? The only way to really gauge a popular mood of a cycle is look to the 'themes' in morality,
religion, art and theater, politics, and perhaps count the number of Wars active or heating up or cooling off. In
every one of these long term categories we are in a deteriorating decline. We must use technical analysis in light
of these big themes that move thru time and create the real economic conditions. I would be more optimistic if I
could see a mathematical possibility of any of the State governments being able to pay their obligations without
firing 20% of their work forces, or not have the Republicans cut spending 10% across the board, or not have the
Democrats raise taxes at every chance they get. In the secular bull markets where all these conditions are being
solved you get the classic bull market like 1949 to 1966. During this time technical analysis disappeared
because it was just a 'buy and hold' environment and everyone just learned to buy the dip and it always worked.
This chart below shows that early beginning phase but even in this very bullish alternative we find ourselves at
the 1184 day count to be near a short term decline to be followed by one last rally for a couple of months

before declining for many months (1184 calendar days = 169 natural square WEEKS).
In the 'modern' era, technicians are trying everything possible to get an advantage, and over the years I have
discussed circular arcs, square roots, JTTL's, and of course the oldest profession-Astrological forecasting. The
Eclipses occur at least twice a year and this year I believe we have four sets- always a sun and moon two weeks
apart. The recent solar eclipse on January 4th got a lot of press and did turn the market and exactly picked the
tops in gold and silver and many commodities. Those of you who get my daily email service saw the eclipse
square of nine calculation of 1424 for gold tying in that date with the eclipse and gold's terminal high- or at least
a very nice short term trade. I don't want to get into a philosophical discussion of planets or eclipses here but it
does stand to reason that the sun and the moon do affect human behavior in many ways and you can use

Stock Cycles Forecast January 7, 2011 Page - 2 -

information about the eclipses for trading without any real knowledge of astro physics. The key to remember is
that a 'Solar' (Sun) eclipse occurs on the suns calendar date and since the eclipse cycle (Metonic Cycle) is 19
years almost exactly, you will find past similar eclipses at 19 year intervals near the same date. If we think our
January 4th eclipse means something than we should see its past effects near the January 4th-5th date at 19 year
intervals. From January 4, 2011 we subtract 19 and get: 1992, 1973, 1954, 1935, 1916, 1897 etc. Of course
1973 leaps off the page as the most significant event in modern investment times starting the horrible 1973-
1974 economic wipeout and resignation of a President and the stock market getting cut in half. Other patterns
are similar or exactly opposite to what we expect for this year as shown in the last letter namely a top in
January, a decline to late February / March, and a final high spike into April and then down for many months.
This chart below from 1935 shows a fairly bullish outcome but the eclipse in January had all the same harmonic
moves we expect near term, so I show it. This pattern had a VERY BULLISH second half of the year and the
April pivot was the low. That will be the key this year- whether April is a high like 1981 or a low like shown
here.

1897 was a little later

than January with the
eclipse near February 1st
so from an astro
perspective it's a bit
different but this chart does
show the same corrective
pattern. Our strategy is to
be defensive the first three
weeks of January and wait
until we see the March
damage before we assume
things are getting
substantially better.

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 Here's our current S&P chart updated from prior issues and it is still in a strong uptrend but creeping along
an angle which if broken will lead to a quick plunge of 5% or more. We need to see acceleration to the upside of
these angles well above 1300 to stay in the bull camp without a very close stop. 1274 is the key pivot and a
likely point for a FINAL HIGH if we are not to surpass 1300. If we stay above 1274 we will go to 1308 and
1325 or higher.

Trader's Tip: Time & Price Proportions- The Fibonacci Ratio

In the last issue I talked about scaling and angles of 1 x 1 and 2 x 1 as dividing time and price into
harmonic proportions. These work all the time but the key to the universe is growth, and the Fibonacci growth
ratio of 'adding each number to its neighbor' usually works as in: 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, etc.
Each of these numbers divided by their 'neighbor' yield either .618 or 1.618 as a limit as they grow towards
infinity. All cells which spit or double often exhibit these ratios and the Elliott Wave guys have made a science
out of it although I don't use that method as there are much easier ways to find harmonics. The big 'problem'
with the Elliott .618 ratio approach is that MOST of the time the early sequences are additive and will
eventually converge to a .618 ratio but the early sequence ratios are nowhere near that. For example adding
these numbers (30, 47, 112) to their neighbors gives : 77, 159 and this ratio of 159 / 77 is 2.06, a long ways
from 1.618. After the trend is evident for a good time the ratios will start to show up but it's usually a better
approach to use simple additive trendlines on charts. The chart below is a snapshot from my Secret Science
book and shows a simple way to take highs to lows or highs to highs distances and add them together to find the
actual Fibonacci ratios growing within each chart. These distances get more and more accurate as time passes
just like the .618 ratio but it's usually easier to keep track of them this way as a warning flag. If you were an
Elliott Wave practitioner you might make a mistake by multiplying 1.618 times the first distance of a top to top
and expect another one, but that would rarely work but the additive approach will give closer hits. One way
around all this is to combine the growth ratios into a growth angle or instead of using 45 degree 1 x 1 angle, use

Stock Cycles Forecast January 7, 2011 Page - 4 -

a slope of .618 or .382 as a trendline. That way every time your angle intersects a high or low in the chart
history you will be at a Fibonacci time and price harmonic and usually a good breakpoint.

Stock Cycles Forecast January 7, 2011 Page - 5 -

 This weekly IBM chart above, shows red vertical week counts in Fibonacci numbers and I show two sets of
timing angles, one a 45 degree trendline, and the other a 38.2 Fib angle. Note that as the 1 x 1, 45 deg angle
crosses the Fibonacci vertical time zone it set ups 'hot zones' in time and price similar to the method I showed
in an issue or two back on sensitive points. The 'fit' of these Fib vertical week counts is certainly not ideal
simply because the 2002 low is not a good starting point for this series. Sometimes you want to move these
grids back and forth horizontally to find good fits. In IBM's case the July 2006 low is interesting now since
that's 233 Fibonacci weeks back and IBM is currently selling near $144 the next Fib number adjacent to 233.
The chart above shows a 45 deg angle connecting a number of tops with the current price so IBM may be
getting ready to correct if it goes under 144 which will be a hot spot now and support if it is to go higher.

Above is an example of slopes at the rates of .618 and .382 points per calendar day ( i.e. .618 x 365 days
plus starting low @788 = 1013 March 12, 2004- one year later). Note how these angles served as support and
resistance and gave time cycle turns when they intersected prior highs or low points in the chart. Also note how
when the .382 lower angles finally broke in October 2007, the bull market was OVER. Curiously, the 'last'
touch of the angle was 1618 days (1.618) from the origin. As with ALL angle methods you should run these
BACKWARDS to see if a Fib relationship from the past is due in the current week.

Here's a look at Amazon with

'smaller' Fib angles of .618 x
multiples of lower numbers until we
find a good fit like these .236, .1458
and .09 Fib ratios. Note that the
'zero' angle starting under the 2008
low is at $186 so the stock could be
'squaring out'. That also ties in with a
Fib parallel angle from the last top.
The alternative is a big spike to 220,
and support is $148.

Stock Cycles Forecast January 7, 2011 Page - 6 -

 CAT shows a more traditional 'square out' of a major high being 99 months from the major 2002 low and
96 weeks from the March 6, 2009 low. The importance of this $96 price is that it is a key Square of Nine
translation number on the Cardinal Cross and the attached bottom was the opposite $23 Cardinal Cross number.
This is SqRt (23) + 5 re-squared = $95.95 exactly where the stock is hesitating now. Since this is a member of
the Dow Jones Industrials which also had a major low on March 6,
2009, this 96 weeks time cycle coming out is likewise a top for most
Dow stocks and the general market. The 'test' of this is that the
immediate number below 96 in the square of nine is 61, and 61 weeks
ago was November 6, 2009 when Cat had a top AT THE PRICE of $61.

The following stocks have cyclic turns during the next three weeks.

GLW HON SMH JNJ DNDN SOHU DISH AA AMZN AXP

1/10 1/10 1/10 1/10 1/10 1/10 1/11 1/11 1/11 1/11
NUE COST APA APC OXY ASA TRV XOM BP CVX
1/11 1/11 1/12 1/12 1/12 1/12 1/12 1/13 1/13 1/13
CDE KLAC MU NEM SNDK MON MSFT WDC AMD AMZN
1/14 1/14 1/14 1/14 1/14 1/14 1/14 1/17 1/17 1/17
BIDU WFC GS HD IBM KBH NSM CAT HGSI GM
1/17 1/17 1/17 1/17 1/17 1/17 1/17 1/19 1/19 1/21
MMM MCD X XOM CCU CVX ADM
1/21 1/21 1/21 1/25 1/28 1/28 1/28

Stock Cycles Forecast January 7, 2011 Page - 7 -

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January Activity Calendar

DATE UP /DOWN DAILY WEEKLY HOURLY

DAY
10 D 3
11 D 3
12 U * * 10
13 U 10
14 U 1
17 U 1
18 D 10
19 U * 1
20 U 10
21 D 2
24 D 10
25 U 11
26 D * * 11
27 U 10
28 U 1
Notes: U means up day, D means down day. Trend changes indicated by the * will generally be more accurate
than the frequent U/D day indications and will usually trend in the same direction until the next *. Hourly turns
are given in local New York City (Eastern) times, i.e.10=10 AM EST.
Summary
90% of the cycles I follow have a high in January JUST LIKE EVERY
SINGLE YEAR FOR THE PAST 10! (Except for two small Early Feb tops)
and then ALL decline until March. April is the pivot for the rest of the year
and will go with either the recovery, or 'double dip'. Support is 1248, 1218,
1180. Upside 1274, 1297, 1333, and 1351. Cycles dates are January 12th-
13th, and 26th.
On the website: for $20 US, (or $30 Non US), you can order
my MTA video presentation and slides..it's the best buy of
your life!!!
Stock Cycles Forecast voicemail telephone number is (212) 866-2934, but I rarely answer phone messages.
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mail. Stock Cycles Forecast is published approximately every three weeks. Annual subscriptions to the newsletter including the
nightly telephone update are $500, a six month subscription is $265. One-year subscriptions without the telephone service are $300,
and a two-issue trial is $50. Mr. Jenkins books and course: The Geometry Of Stock Market Profits ($50), Chart Reading For
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Michael S. Jenkins Complete Stock Market Trading and Forecasting Course ($529 US $550 Foreign), and Secret Angle Method
($500), and Michael S. Jenkins Trading Video ($900) are available for purchase by check mailed to: Stock Cycles Forecast, P.O. Box
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mjenkins@stockcyclesforecast.com. The information and statistics as well as the original theoretical concepts utilized in this report are presented solely on the
basis of the writer’s interpretation of such factors and may not reflect specific knowledge or fundamental analysis of any of the companies mentioned. Any opinions
expressed are subject to change without notice. Neither the information nor any opinion-expressed herein constitutes a representation or solicitation for the purchase or
sale of any security. From time to time the publisher, his associates or members of his family may have a position in the securities mentioned in this report.

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