Stock Cycle

Druids and stock traders have some things in common. No, it's not that both groups spend a lot of times in robes conducting bizarre ritualistic sacrifices (but, hey, who are we to judge what people do in their spare time?). It's that both groups believe in the importance of cycles.

Druids placed great ceremonial meaning on the turning of the seasons. Similarly, traders put stress on the stock cycle, a pattern of increasing prices, followed by a peak, and an eventual decline...before starting all over again.

The technical theory of the stock cycle was developed by Richard Wyckoff, who saw it unfolding in four distinct phases: 1) accumulation, 2) markup, 3) distribution, and 4) markdown.

The cycle perpetuates because of the movement of money from large institutions. Wyckoff believed that, by anticipating the stages in the cycle, a trader could profit from big money moving in and out of stocks...like the hyenas who follow the lion pride around, waiting to pick up some scraps. Or, if you want to think of it more generously, like farmers anticipating the weather so they know the best time of the year to plant, and then harvest, their crops.