With the cyclical analysis principles illustrated in Investing for Profit With Torque Analysis of Market, there are now two methods of arriving at the answer, each of which supplements the other, which is reasonable because stock prices consist of not one but two parts: earnings (intrinsic) value and cyclical (market) worth.
By fundamental analysis, we can determine the earnings-value portion-or the relatively stable intrinsic value in a stock’s price, expressed as a normal price earnings ratio-and, from a projection of probable future earnings, the trend which future values are likely to follow.
By cyclical analysis, we can determine the cyclical-worth portion-or the highly variable high and low market prices likely to be paid as a premium for, or as a discount from, those fundamental values at future points in time. As a bonus, because of the proclivity of cycles to trough at about equal time intervals, cyclical analysis can also indicate when the alternating high and low market price levels are likely to be reached.
Cyclical analysis is concerned with measurement and assessment of the rhythmic fluctuations of market price above and below intrinsic values. lt is based, first, on the determination of the TORQUE FACTOR-or the value of the force which cycles exert to push prices above fundamental values in an upward swing and pull prices below fundamental values in a downward swing of the cyclical rhythm-and, second, on the projection of cyclical rhythms into the future.
When we combine the two methods, we are able to assess future probabilities for price movement from ( 1) the trendular direction of intrinsic values, as indicated by fundamental or economic analysis, and ( 2) the cyclical direction of present and future price rhythms, as indicated by TORQUE ANALYSIS of the price cycles.
This book, then, has twin purposes: ( 1) To show you that cycles are real forces in the stock market and exert real and observable force in the movement of stock prices (causing, probably, more than half of the extent of a price swing). ( 2) To show you how to make your own appraisal of the probable timing and extent of future price swings. With this knowledge your profit performance should improve-if you can accept the idea that, with cycles, a trough is a prelude to an ensuing peak and not an indication of even lower prices, and that a peak is not an indication of even higher prices but of lower prices to come.
The book is written for the man who does not have access to a computer but who can do simple calculations on paper or, better. with a small calculator. You will understand the mathematical principles involved, since they are fully explained.
It is important to note, in this context, that profits derive from consistent gains and, only rarely, from a “killing.” Great oaks from little acorns grow-but the trees do not mature in a couple of days. They grow in surges from the successive thrusts of each springtime, or the upward thrusts of the annual cyclical rhythm.
The thrust of this book is that, with a little homework after you have the basic tables set up. you can easily determine for yourself ( 1 ) the trendular or long-term direction of price by analysis nf the longer cycles, and by fundamental analysis, (2) the cyclical or short-term direction of price by analysis of the short cycles and (3) when both types of cyclical movement are likely to be concluded and reverse in the opposite direction. When you couple this knowledge of timing and extent with fundamental analysis, you should be able to show consistent profits in the stock market because you will be able to “see through” surface indications and judge for yourself the flow of the basic currents underlying stock price movements.
- Section 1. THE PRICE CYCLES IN THE MARKET
- Section 2. THE FORCES AND FRAMEWORK OF THE CYCLICAL STRUCTURE
- Section 3. HOW VOLUME POWERS THE CYCLE MECHANISM
- Section 4. TORQUE ANALYSIS OF STOCK MARKET CYCLES
- Section 5. THE ART OF FORECASTING WITH MARKET CYCLES
- Section 6. HOW TO PROFIT FROM STOCK MARKET CYCLES