Edgar Lawrence Smith - Ten-year Cycle Theory

Smith theorized that there must be a ten-year, or 120-month, cycle. This would result from ten 12-month, annual cycles and three 40-month cycles coinciding every 10 years. When Smith investigated prices more closely, he found that indeed there appeared to be a price pattern in the stock market and had similar characteristics every ten years. This pattern has since been called the "decennial pattern". The decennial pattern theory states that years ending in 3, 7, and 10 (and sometimes 6) are often down years. Years ending in 5, 8 and most of 9 are advancing years. Smith did not follow the normal calendar year beginning in January but found that counting the beginning of a year in October was more reliable, he also hypothesized that occasionally a nine-year or 11-year cycle overlaid the decennial cycle.

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