INTERVIEW
Time The Market Using Cycles
An Interview With Jake Bernstein
by Jayanthi Gopalakrishnan
Cycles expert Jake Bernstein's analytical eye has seen the tide of the markets ebb and flow for more than 30 years. Many of the long-term social, political, and economic forecasts Bernstein has published in the last two decades have come to pass, including the interest rate top of the early 1980s, the deflation of the 1980s and early 1990s, the Japanese economic peak, the explosion in genetic engineering technology, the interest rate lows of the mid-to late 1990s, the Gulf War, and many more. He is president of MBH Commodity Advisors and Bernstein Investments, the publisher of Bernstein On Stocks, The Letter Of Long Term Trends, Short Term Stock Trader's Hotline, MBH Weekly Commodity Trading Letter, Monthly Key Date Trader, and Short Term T-Bond Hotline. His newsletter and advisory services are read all over the world by traders, investors, brokers, financial institutions, and money managers alike.Bernstein also has an Internet presence, which includes Jake Bernstein on Futures (www.trade-futures.com) and his stock market advisory, 2Chimps.com. His areas of expertise include stock and commodity trend analysis, long-term trend and price forecasting, seasonal price patterns, cyclical economic analysis and timing, trading system and timing indicator development, computerized stock and futures trading, trader and investor psychology, short-term and day trading, economic forecasting, and historical price pattern analysis.
Articles by Bernstein have appeared in Futures, Money Maker, Barron's Financial Weekly, FarmFutures, and other leading financial publications. He is a weekly commentator on business television and has appeared on numerous radio and television business shows, including the Financial News Network, Jag.FN, Web.FN, Cnbc, and Wall $treet Week. In addition, he has been a keynote speaker, workshop leader, or organizer of more than 500 investment and trading conferences throughout the world over the last 20 years. He is considered a leading educator in the field of stocks and commodities; his newest book, Profit In The Futures Markets, was recently published by Bloomberg Press.
What does Bernstein have to say about the current markets? STOCKS & COMMODITIES Editor Jayanthi Gopalakrishnan found out when she spoke with him on May 1, 2002.
Tell us how you got started in technical analysis.
I was born in Europe and eventually moved to Canada and then the United States. I got my degree in clinical psychology. I started work in that field, but became interested in the markets in 1968. At that time I also began trading the markets. At the time, I realized that a lot of the indicators and methods and systems that people were using were not very effective, because they were based on things that were not really proven one way or another; they were more myth than anything else.
What did you do?
I found a classic book on the subject titled Benner's Prophecies Of Future Ups And Downs In Prices. In it, the author, Samuel Benner, discussed cyclical patterns of the market, primarily in corn prices, and in the price of hogs. I thought his work was fascinating. I pursued that field, and began to realize that there were repetitive patterns, and that many patterns in various markets were based on time as opposed to price, and that many patterns actually occurred within certain dates of the year. That's the direction in which my work took me, and how my interest in cycles was generated.
Could you tell us about the techniques you use to identify cycles?
When I first started, the techniques I used were very simple. I looked at the charts and measured the distance and time between two points. That was really all I had the ability to do back in the early days. But I became familiar with the work of the Foundation for the Study of Cycles. They had numerous computer programs and techniques to isolate and extract cycles from data, and I began to use those. My work progressed to the point where the computer did most of the work.
What else did you use?
Another method I used, and this was a subcategory of time-based cycles,
was with seasonality. With seasonals, the approach is simple; all we do
is search a vast amount of data to find the repetitive patterns within
the data, and extract them that way. Unfortunately, over the years seasonality
has received a bad name. There are a lot of people, unfortunately, who
don't feel that seasonality exists in the markets. But that is really one
of my strongest suits in the market, namely the demonstration that there
are time-based patterns that are specific, even to the very date.
...Continued in the July 2002 issue of Technical Analysis of STOCKS & COMMODITIES
Excerpted from an article originally published in the July 2002 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2002, Technical Analysis, Inc.