Anomaly in Stock market? 9-Jun-2015

Since the end of last month, stock markets have declined in major economies, UK, US or Japan where Nikkei down more than 1.70% of the last closing.

It is some sense of anomaly to bring technical analysis into the stock market. Some of the stock indexes are likely near the peak of long term cycle. Back to Nov-2014, the potential cycle has been observed in FTSE 100 and Dow Jones Industrial Average indexes, and it was introduced in this blog.

Although the stock markets have not crashed critically yet since that time, the recent market is relatively volatile particularly this month. The cycle analysis still indicates the stock index is still near the peak of potential cycle in FTSE 100. Despite the cycle of DJIA not clearly detected, correlation between DJIA and FTSE 100 is more than 80% in last 20 years. Once one of them has crashed due to critical event, another could suffer as if it is like dominoes.

The market cycle is sometimes anomaly, and it means nothing more than mathematics or statistics. But the fact is both of stock market and bond market are relatively volatile in those days.