This report, while not exhaustive, is meant to be a thorough introduction to the work of George Lindsay.
The work of George Lindsay served to forecast the highs and lows of the basic cycles (cyclical bull and bear markets) and long cycles (secular bull and bear markets).
This report, while not exhaustive, is meant to be a thorough introduction to the work of George Lindsay.
The work of George Lindsay served to forecast the highs and lows of the basic cycles (cyclical bull and bear markets) and long cycles (secular bull and bear markets).
This report, while not exhaustive, is meant to be a thorough introduction to the work of George Lindsay.
The work of George Lindsay served to forecast the highs and lows of the basic cycles (cyclical bull and bear markets) and long cycles (secular bull and bear markets).
commodity, and currency markets. An Introduction to Lindsay
Seattle Technical Advisors The leading authority in Lindsay Market Analysis
Special Report April 28, 2014 Ed Carlson, CMT ed@seattletechnicaladvisors.com Seattle Technical Advisors website, PO Box 2415, North Bend, WA 98045, is published as an informational service for subscribers, and it includes opinions as to buying, selling, and holding various securities. However, the publishers of Seattle Technical Advisors are not investment advisers and do not provide investment advice or recommendations directed to any particular subscriber or in view of the particular circumstances of any particular person. Information provided by Seattle Technical Advisors is expressed in good faith but is not guaranteed. . This report, while not exhaustive, is meant to be a thorough introduction to the work of George Lindsay. The work of George Lindsay served to forecast the highs and lows of the basic cycles (cyclical bull and bear markets) and long cycles (secular bull and bear markets). The Hybrid Lindsay model is an adaption and modification, by Ed Carlson, of Lindsays Middle Section approach to enable forecasts of the highs and lows within the basic cycles.
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Traditional Lindsay From what we know of the work of George Lindsay, he was primarily concerned with forecasting the highs and lows of bull and bear markets as opposed to intermediate highs and lows within the larger trends. While a forecast of the inflection points of bull and bear markets is of obvious interest to all market participants, the application of these forecasts is limited to buy-and-hold investors who, despite all labels, would prefer to hold their assets in cash during bear markets. To identify highs and lows Lindsays work starts with the broadest possible outlook and progressively narrows down that estimate using his various models until arriving at a single-date point forecast. Lindsay cautioned that his methods were meant to be applied only to the Dow industrials index or an even narrower index. Lindsay Models The forecasting approach used by George Lindsay can be divided into the following models. Long Cycles Long cycles are analogous to what are commonly referred to today as secular bull and bear market cycles. Unlike the modern, muddled approach to identifying secular market cycles, Lindsay had a disciplined approach for identifying the beginning and ending dates of these cycles. Long Term intervals are the first step in forecasting the highs of cyclical bull markets and lows of a cyclical bear markets. Bull market highs are found with 15year intervals. Bear market lows are found using 12year intervals. Basic Movements are basic advances and basic declines (bull markets and bear markets). These movements are timed using Lindsays standard time spans which use calendar days, not trading days. While they often stretch between the same highs and lows as the basic cycles (below), Lindsays work enables us to know when they do not. It is this imbalance that opens the next door to forecasting the random walk of the markets. Basic Cycles are those time periods most people think of when identifying the highs and lows of bull and bear markets. Middle Sections were described by Lindsay as my prize way of calculating time in the market. A Middle Section is that period in a bull market when the rate of ascent (slope) of the Dow is less than what comes both before and after it. Lindsay labeled the points in a Middle Section and explained how to count to turning points in the market employing a knowledge of the basic cycles.
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Long Cycles Lindsay explained his concept of the long cycle in his seminal paper An Aid to Timing, published in 1950. In it he included the chart at left showing his long cycles from 1798 to 1949. Each long cycle is approximately 20years in duration and is composed of two multiple cycles; A-E and E-M (bottom left). The first multiple cycle, A-E, is typically 7years in length. The second multiple is more variable but the time span from A to J is typically very close to 15years in length. Note the symmetry of the long cycles during our modern age of central banking (bottom). Each multiple cycle is composed of 2-4 basic cycles.
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Long Term Intervals The long term intervals are the first step in forecasting a bull market top or bear market low. The 15year interval is a time span of 15years to 15years+11months counted from an important low. It is this 11month period that has proven to have the highest probability of containing the top of a bull market. This forecast period is then narrowed using Lindsays other models. The bull market high on 10/11/07 fell within the 15year interval counted from the low of a basic cycle on 10/5/92. The 12year interval is a time span of 12years+2months to 12years+8months counted from an important high. It is within this 6month period that has proven to have the highest probability of containing the low of a bear market. This forecast period is then narrowed using Lindsays other models. The bear market low on 3/6/09, counted from the high on 5/23/96, was slightly more than one month late at 12years, 9months but within the expected margin of error. This error would be eliminated as fine-tuning occurs using Lindsays other models. An Introduction to Lindsay April 28, 2014 SeattleTechnicalAdvisors.com Page 4
Basic Movements Lindsay discovered that all advances and declines are contained within, what he referred to as, the standard time spans (top). Basic Advances The basic advance which terminated at the closing high on 10/09/07 is counted from the closing low of the previous basic decline on 10/21/05. It counts 718 days making it a short basic advance. Basic Declines The low of the basic cycle on 3/6/09 is an example of a basic movement and basic cycle not being in agreement. To count the basic decline from the intra-day high on 10/11/07 would have been 512 days and longer than any of the standard time spans. The low on 11/21/08 fell within the 12year interval and counted 407 days a long basic decline. Given that the previous basic decline from the intra-day high on 3/7/05 to the intra-day low on 10/13/05 was subnormal (220 days), Lindsays Principle of Alternation guided us to expect the current decline to be long. Lindsays Principle of Continuity demands that the next basic advance be counted from the secondary low on 11/21/08 (and not the low of the basic cycle on 3/6/09). An Introduction to Lindsay April 28, 2014 SeattleTechnicalAdvisors.com Page 5
Middle Sections 2007 High Deriving a forecast for a high or low requires the use of two separate Middle Section counts. One comes from the basic cycle and the other from the multiple cycle. Basic Cycle A Middle Section forecast is centered on the low of the basic cycle on 10/13/05 (top). The high of a flattened top on 10/15/03 is 729 days prior to 10/13/05. The intra-day high of the bull market on 10/11/07 was 728 days later. Multiple Cycle The 1982-2003 long cycle was followed by a shift, or early start by the next long cycle. As a result the old long cycle ended at the secondary low in March 2003 and not the ultimate low in 2002. This was seen previously when the 1914 long cycle ended at the low in 1933, not the low in 1932. A Middle Section is centered on the low of the 1982-2003 long cycle on 3/12/03. Point E of a descending Middle Section falls 1,678 days earlier on 8/7/98. The high on 10/11/07 was 1,674 days later confirming the forecast from the basic cycle. An Introduction to Lindsay April 28, 2014 SeattleTechnicalAdvisors.com Page 6
Middle Sections 2009 Low At this point, the obvious question should be how would it have been known that March 2009 was to be the final low of the bear market and not November 2008? The answer is found in Lindsays rule that the low of a terminal decline (the final decline in a long cycle) is found using a Middle Section centered on the final high of the long cycle. Terminal Decline The high of the long cycle occurred on 10/11/07. No Middle Section centered on this high counted to the low on 11/21/08. Point C (5/17/06) of a descending Middle Section counts 512 days to the high on 10/11/07. Exactly 512 days beyond the turning point (10/11/07) is the bear market low on 3/6/09. The same approach was used to identify the 3/12/03 low. An Introduction to Lindsay April 28, 2014 SeattleTechnicalAdvisors.com Page 7
Basic Cycle Lows Multiple Cycle/ Middle Sections Middle Sections are used for more than just counting to the highs and lows of major bull and bear markets. The highs and lows of the basic movements can be forecast using this approach, too (Remember: we would first isolate a time frame for a high or low using the standard time spans). Lindsay wrote that to forecast the low of a basic cycle a Middle Section is centered on the high of the final basic cycle in the previous long cycle. To forecast basic cycle lows in the 2002 long cycle we must center the counts on 1/14/2000 as that is the high of the final basic cycle in the 1982- 2002 long cycle (basic cycles are marked in black below the price data). Notice that the first Middle Section counts to the secondary low in 2003 and not 2002. This is due to a shift in the long cycle (last seen at the 1932/33 lows). This phenomenon is fully described in the book George Lindsay Training Course; 1921-1942 Long Cycle. An Introduction to Lindsay April 28, 2014 SeattleTechnicalAdvisors.com Page 8
Basic Cycle Highs Basic Cycle/ Middle Sections Lindsay outlined, in detail, his rules for forecasting basic cycle lows as well as the high of the second multiple cycle of a long cycle in his paper An Aid to Timing. The preserved work of Lindsay has a gaping hole in it, however. Other than using the long term intervals and standard time spans there is no mention of forecasting the highs of basic cycles with Middle Sections. Fortunately, the record shows that when forecasting highs during the first multiple cycle, the origin of the final basic cycle in the previous long cycle is the correct turning point. In the chart it is seen that the final basic cycle of the 1982-2003 long cycle begins on 4/14/97 and forecasts the highs during the first multiple cycle (2003-2009). When forecasting highs during the second multiple cycle, the end of the first basic cycle in the current long cycle is the correct turning point. In the chart it is seen that the first basic cycle of the 2002 long cycle ends on 10/13/05 but the actual low is on 10/25/04. Centering forecasts on this low is successful in identifying the highs on 5/2/11 and 4/4/14.
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Hybrid Lindsay As the previous pages illustrate, the work of George Lindsay served to forecast the highs and lows of the basic cycles. The Hybrid Lindsay model is an adaption and modification, by Ed Carlson, of Lindsays Middle Section approach to forecast the highs and lows within the basic cycles. Forecasting Highs When forecasting highs within a basic cycle (rather than its origin, high, and ending points) the Middle Section forecast from the basic cycle is centered on origin/low of the current basic cycle and not one of the two basic cycles encircling the origin/low of the long cycle (as shown on the previous pages). Similar to the traditional Lindsay approach, a forecast from the basic cycle needs to be confirmed by a forecast from the multiple cycle. Forecasting Lows When forecasting lows within a basic cycle the Middle Section forecast from the basic cycle is centered on the high of the previous basic cycle rather than the high of the final basic cycle in the previous long cycle as was shown by Lindsay. Similar to the traditional Lindsay approach, a forecast from the basic cycle needs to be confirmed by a forecast from the multiple cycle.
The pages that follow show forecasts from the Hybrid Lindsay model for intermediate peaks and troughs during the 10/4/11 basic cycle.
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Hybrid Lindsay May 28, 2013 High Basic Cycle Using the low of the basic cycle on 10/4/11 a low-low-high (LLH) interval targets the high on 5/28/13. The low on 2/8/10 is 603 days before 10/4/11. The high on 5/28/13 is 602 days later.
Multiple Cycle To confirm the forecast from the basic cycle we turn to the multiple cycle. The high of a flattened top is on 3/14/92 and lies 3,872 days before the low of the multiple cycle on 10/10/02. The 5/28/13 high is 3,883 days later.
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Hybrid Lindsay June 24, 2013 Low Basic Cycle Lindsay wrote that when forecasting the low of a basic cycle, the turning point in a Middle Section forecast is the high of the final basic cycle in the previous long cycle. In this example, were not trying to find the low of a basic cycle, rather a low within a basic advance. Centering the Middle Section forecast on the high of the previous basic cycle in the current long cycle worked remarkably well. The high of the previous basic cycle fell on 5/2/11 784 days after the closing low on 3/9/09. 784 days after the high on 5/2/11 is the low on 6/24/13. Lindsay referred to this as a mirror image pattern.
Multiple Cycle A forecast for a low must be centered on the high of the multiple cycle, 10/11/07. The closing low on 1/29/02 is 2,081 days prior to 10/11/07. The low on 6/24/13 is 2,083 days beyond 10/11/07.
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Hybrid Lindsay August 2, 2013 High Basic Cycle Using the low of the basic cycle on 10/4/11, the intra-day high of a flattened top on 12/4/09 is 669 days prior. The high on 8/2/13 is 668 days beyond 10/4/11.
Multiple Cycle The low on 12/11/91 counts 3,956 days to the low of the multiple cycle on 10/10/02. The high on 8/2/13 is 3,949 days beyond 10/10/02 creating, what Lindsay called, a low-low-high pattern.
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Hybrid Lindsay August 27, 2013 Low Basic Cycle Using the final high of the previous basic cycle on 5/2/11, the high on 1/6/09 is found 846 days prior. This high would be labeled as point G in a descending Middle Section but counts from this pattern are taken from point E. However, Lindsay showed numerous counts from point G (unfortunately without explanation) in his paper An Aid to Timing. Here we find yet another example of it working successfully. The low on 8/27/13 is 848 days after 5/2/11.
Multiple Cycle The high of a flattened top (point E in an ascending Middle Section on 11/26/01) counts 2,145 days to the high of the multiple cycle on 10/11/07. The low on 8/27/13 is 2,147 days past 10/11/07.
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Hybrid Lindsay September 18, 2013 High Basic Cycle Centering the Middle Section forecast on the low of the basic cycle on 10/4/11, point E of a large ascending Middle Section is found on 10/19/09 715 days prior to the turning point. Exactly 715 days after the turning point the Dow printed a high on 9/18/13.
Multiple Cycle Centering the Middle Section forecast on the low of the multiple cycle on 10/10/02, the high of a flattened top (and point E of a Middle Section) on 11/1/91 is 3,996 days prior. Exactly 3,996 days after the turning point the Dow printed a high on 9/18/13.
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Hybrid Lindsay October 9, 2013 Low Basic Cycle Centering the Middle Section forecast on the high of the basic cycle on 5/2/11 we find the low on 11/21/08 (the secondary low from which the first basic advance of the bull market is counted) 892 days prior. The low on 10/9/13 falls 891 days after the turning point on 5/2/11.
Multiple Cycle Centering the Middle Section forecast on the high of the multiple cycle (10/11/07) we find one of the highs (not the highest high) of a flattened top falls 2,185 days earlier on 10/17/01. The low on 10/9/13 is 2,187 days beyond the turning point (10/11/07).