are cyclical in nature and produced by long term drifts in the sentiments of the investing community.
These sentiments often related to multiple factors like market level anticipation, growth rate and economic activity as well as how investors look at these factors. There will be always relation in between primary stock market movements and economy cycle.
As corporate profits and interest rates are an integral part of business cycles. We see price movement changes in markets with them.
Nevertheless, Stock market cycles are not solely depended on economic activities and cycles. If it is, then prediction of stock market price movement will be easy task to all of you, but practically it is not, that why we take help of technical analysis.
Market gives , but it varies time to time and depend on situations like political willpower or crisis, Speculation or margin calls, sudden natural disasters.
For example, economy trends take some time to happen. Usually, it is 6 to 9 month period. But as cycle goes on, many events unfolds and it will react to them. Sometimes they are external factors like political developments. Or internal like speculative furious buying rallies or wide-. These intermittent changes may give 5 to 10% movement in stock market against primary trend.
This is same like intraday extreme high and low of market. It does not matter technically but triggers many traders stop losses.
We already seen this in Stock Market discounting mechanism article that, Stock market most of the time trends ahead of time. If outlook of economy is strong, we will see strong uptrend rally in market before actual ground changes. But sometimes, economy precedes stock market. There are plenty examples of this in stock market history. This also a factor that impact your investing decision.
Doubt about economic recovery and political will might inhibit. That why sometimes, we sees sharp and confusing counter-cyclical price movements in stock market. These are wipeout sessions for amateur traders and investors.
Bond and commodity market cycle are much more directly linked to real economic business cycles. But here also psychical factors gives prices extreme swings. While currency market does not fit into business cycle analysis, but here also major turning points can be related to real ground-based economic changes.
to analyze this and forecast these market cycle trends.