Grand Finale…all the Tools were Assembled

In the depths of the Great Depression, the Dow Jones Industrial Average (DJIA) hit a low of 40.56 in July 1932. Since that time there have been three major advances. The first Cycle Wave peaked in 1937. The second Cycle Wave was a correction that last until 1942, shortly after the United States got into World War II.

The third Cycle Wave lasted about 24 years from 1942 to 1966. This was a tremendous post-war boom for our country and for the world as countries recovered and rebuilt.  But from 1966 until 1982 the stock market chopped sideways in a complex correction for Cycle Wave IV.  There were many ups and downs but the DJIA could never really break through and sustain a move above 1000.  This wave pattern fit the Elliott Wave guidelines of alternation perfectly in that Cycle Wave II was a sharp pullback and Cycle Wave IV was sideways.

So the DJIA lifted off in Cycle Wave V in August 1982. And it’s been an amazing run.  Cycle Wave V has taken 38 years and is about to complete. The length of these large cycle waves have interesting Fibonacci relationships.  Cycle Wave I was 5 years. Cycle Wave II was 5 years. Cycle Wave III was 21+3 years. Cycle Wave IV was 13+3 years. Cycle Wave V is 34+4 years.  Cycle Wave V may actually stretch into early 2021 but we are getting very close to the end.

When you think about all the tools of market participation and speculation, it is amazing to see when these tools were introduced. Almost all of them were launched during Cycle Wave V.  This wave has created the most extreme market price action of the entire 88 year history of SuperCycle (V). So what tools are we talking about? 

The following is a list of the market instruments and when they were introduced. I am numbering them and putting their corresponding number on the long-term monthly chart of the DJIA.

1. 1973 – Exchange traded call options on stocks
2. 1977 – Exchange traded put options on stocks
3. 1982 – S&P 500 futures contract introduced by CME
4. 1983 – first option on stock index futures
5. 1988 – first domestic futures contracts based on foreign stock indexes
6. 1990 – LEAP options created with expirations up to 3 years
7. 1993 – CBOE creates the Volatility Index (VIX) 
8. 1993 – S&P 500 ETF (SPY) began trading
9. 1998 – DJIA ETF (DIA), “diamonds” created
10. 1999 – Nasdaq 100 ETF (QQQQ) began trading
11. 2004 – VIX futures contracts created
12. 2005 – VIX options launched
13. 2005 – Weekly options introduced
14. 2006 – first leveraged ETFs introduced

I may have missed a couple but you get the picture. Now these instruments don’t cause irrational exuberance but they sure help social mood to get played out in the stock market.  I think that many of these instruments are great tools and when combined with the technological revolution since 1982, it has been simply amazing.  The explosion in the stock market during this Cycle Wave V from 1982 is incredible.  

For some perspective, the average daily volume on the NYSE in 1980 was 44.87 million shares up from 32 million shares a day in 1979, which was then a record. (NY Times 1/1/81)  The average daily volume today is 4.2 billion shares according.Yahoo Finance.

Memorial Day | Remembered… Forever

The following is a post I wrote last year on Memorial Day weekend. I see no reason to change it as I am proud to remember and honor those who have gone before us. This is definitely a different holiday weekend with millions out of work and fighting a terrible pandemic. 

Here in the United States it is officially Memorial Day on Monday. Cookouts, camping, boating, the Indianapolis 500 all part of the official start of the summer season. But on this Memorial Day weekend my thoughts turn to remembering my Uncle Bob.

World War II

Uncle Bob served in the Army in World War II and the Korean War and then at the Pentagon for many years. He was a great guy and my favorite uncle. I was fortunate to have been able to spend some time with him in the late ’80s when we lived in Northern Virginia.

He would come visit the family and many times he and I would go play golf at Andrews Air Force Base and other courses around Washington D.C. I remember asking him about the war but he never wanted to talk about it. That was Uncle Bob.

Twice Honored

He didn’t want to talk about how he was in North Africa in 1943 and won the Silver Star for bravery. He didn’t talk about the Bronze Star that he received either. He didn’t talk about the fact that he was with the Army fighting their way up Italy to Monte Casino. I have a newspaper article about Uncle Bob from April 1944, with the title… “Says War Beyond Description”.

Uncle Bob died in 1990 of cancer at the age of 69. He, like my Dad, just liked those cigarettes a little too much.  Uncle Bob was laid to rest in Arlington National Cemetery. I was there when they buried him. I have his flag and his medals.

Remembering Uncle Bob and many others on this Memorial Day weekend. Remembered …forever.