Cycles of Boom-and-Gloom

Trading in the stock markets is getting more & more risky for both bulls as well as bears, though the latter have a distinct advantage these days. Naturally we are flooded with the Boom-and-Gloom cycle theories and the market manipulation/conspiracy rumours. But somewhere I read that the market basically reflects MASS HUMAN BEHAVIOUR patterns stemming from Greed and Fear. One can compare it with the ocean waves or the pendulum swings or whatever. A friend showed me the findings of one analyst which I present below. This is what he says:

In a nutshell, all cycle theories point to the following main cycles:

1Up - 2Dn - 3Up - 4Dn - 5Up, 5A Dn, 5B Up, 5C Dn.

1Up: Rise from a slumber...followed by more rises....
2Dn: To some profit booking from those rises...
3Up: To genuine stock rises based on fundamental reratings...
4Dn: To some surprising drops in economic figures, but these not being significant...
5Up: To euphoric stock market rises backed by easy credit to leverage oneself four to ten times of capital available using any sort of super-leverage instrument (like derivatives-F&O in India) and feed/create the "bubbles" of that generation (e.g. dotcom, real estate, commodities etc).

5A Dn: Inexplicable collapse in stocks
5B Up: A rally of sorts but nobody makes money here in this rise (<-- we've been in this phase since Jan 18th till now in April 2008)
5C Dn: Super collapse when all resistance to sellout ends. Even Very Long Funds now capitulate and start getting out of the market. The bubbles burst.

And then back to 1Up as above.

All these cycles can last for 10 yrs, 10 Qs, 10 mths, to 10 hrs. For eons the humans have behaved this way, and will continue to do so.

According to this we still have to weather one SUPER COLLAPSE cycle of 5C Dn. Hopefully, it won't last very long in India. A Quarterly Review from Religare predicts that the Sensex would be 18400 in March 2009. So I'm more willing to bet on 5C Down cycle starting soon after the major company results have been announced. When will it end? When everyone collectively feels that the markets have touched "the bottom," and the economic conditions are positive. Till then, CASH IS KING.

Paresh