Cycle Analysis
Principle of Proportionality
The principle of proportionality suggests that cycles with larger amplitudes tend
to have longer cycle lengths or durations. This is fairly intuitive, as larger cycles
usually take longer to complete one full cycle.Principle of harmonicity
The principle of harmonicity suggests that cycle periodicities tend to be harmoni-
cally related, that is, cycle periodicities tend to occur in:■ (^) Multiples of two
■ (^) Subdivisions of two (halves, 1/2) or three (thirds, 1/3)
There is usually a mathematical relationship based on the doubling, halving,
tripling, or one‐third subdivisions of the wave periodicities. This means that a 20‐
period wave is related harmonically to a 5‐ (1/4), 10‐ (1/2), 40‐ (×2), and 80‐ (×4)
period wave. A 30‐period wave is harmonically related to a 10‐ (1/3), 15‐ (1/2),
60‐ (×2), and 90‐ (×3) period wave. Waves with periodicities that are harmonically
related by multiples or subdivisions of two tend to top and bottom together.
Principle of variation
The principle of variation simply suggests that all cyclic principles are subject to
fluctuations in the markets and as such will not always unfold as the principle
suggests. In other words, the principles are merely guidelines of wave behavior
tendencies. Market do not always top and bottom perfectly in sync. Cycle ampli-
tudes are also not always preserved and will tend to change over time. One simple
example of variation is a cycle inversion. A cycle inversion is a peak forming in
figurE 20.13 Principle of Commonality (and Synchronicity) in Action Globally.
Courtesy of Stockcharts.com