The DJIA Index was congruent with presidential
election cycle historical standards with market falling in the post election
year of 1901. Although a temporary bottom was found in the mid-term election year,
the market collapsed in the pre-election year of 1903 against historical
expectations.
The first auto show sparked a bullish
response and the Wright brother's first flight helped the market identify
a bottom during a half-way point of the 1902-1904 recession. (See yellow
transparent grid on the bottom of the charts to identify economic
recessions). You will later see how the market does not always anticipate
or respect economic recessions. Human emotion is the biggest market
driver.
Notice the bearish response to President
McKinley's assassination. You will later see how the market reflects
changing human morals and values, as political assassinations in future
years demonstrated little influence on the stock market. Without any
intended disrespect for the deceased, the markets recognize that political
leadership's only positive impact to free markets is to undo their prior
damage. Thus, the market increasingly shows little respect for
presidential assassinations.
Capitalists are providers of increased
quality of life. Politicians take away. Free markets invest in
capitalists; not politicians. As you will later see, the stock market
reduces their deaths to "market" irrelevance.
As you can see, bullish seasonality (pink) is
incongruent to historical standards during the bearish market periods and
bearish seasonality (white) was also incongruent to historical standards
during bullish periods.
You will later see this is one of the busiest
trading periods on record. Scroll down for additional links and to
continue tour.
As you can see from the chart, the election
year, 1900, was relatively flat. Bear signals #2 and #4 were generated
because the market fell below the Incumbent Trip Line, ITL. Bull signals #1
and #3 were generated because the market moved above the same Incumbent
Trip Line.
The post election year of 1901 was bearish.
That was consistent with historical standards. The BRS-1 cycle was above
Red and per rule A, it was not assigned a Trip Line. Bull signal
#5
originated at Yellow generating a Yellow Bull cycle. When the BRS-2 cycle
became hybrid,
Trip Line assignment rule D caused the construction of the
Yellow Trip Line from the market's maximum point. Bear signal #6 was generated when
the market fell below Red and the Yellow Incumbent Trip Line.
Significant fluttering occurred in late 1902
with several Bull and Bear signals. The MTI-RYS Heuristic cannot avoid
this fluttering at this time. Although the Quick-term Indicant will avoid
much of this fluttering, this heuristic model is expressed as a stand
alone gauge without any modification or intervening bias. The market fell
below and crossed above the Incumbent Trip Line while being below Red.
The MTI-RYS Heuristic needs only one reason
to signal Bull and two reasons to signal Bear. A Bull signal is generated
when crossing above any line or curve and a Bear signal needs to be below
at least two of them.
In this particular election cycle, there was
an above average number of Bull/Bear cycles signaled by the MTI-RYS
Heuristic. You will later see there were an unusual high number of
bull/bear signals in the period 1900 through 1904.
