by David Campbell on Jun 03, 2011
The constituent parts read like a discarded plot line from The Da Vinci Code: the ancient Greek mathematical principle of the Golden Ratio, elements of chaos theory and systems analysis, lunar cycles, and the mysterious interaction of human behaviour with the natural world.
Its adherents – inherently cagey, and as they see it, guardians of information that can hold the key to remarkable wealth – are not keen to let the outside world in on their secrets. Welcome to the shadowy world of cyclical analysis.
While the examples above are at the fringes of a discipline that is essentially nothing more than an attempt to read the patterns of market behaviour, they are representative of its general approach.
‘As long as there is a logical link between natural life cycles and the markets then I think that sort of cycle analysis is valid,’ says Murray Gunn of The Society of Technical Analysts.
‘There has to be a link to natural cycles because as we are part of nature and mass human psychology drives the markets by exhibiting herding behaviour just like other natural animal forms. Nature has a rhythm and so it is not such a massive leap of faith to observe and believe the human-driven markets have a natural rhythm too.’