Unveiling Hurst’s Principle of Commonality in Cyclic Analysis

Introduction

The cyclic principles taught in Hurst’s cycles course are universal and have existed since the dawn of civilization. In today’s article, we will discuss the all-encompassing principle of commonality from a completely different and unprecedented perspective.

The foundation of cycle analysis, as articulated in Hurst’s cycle methodologies, posits universal cyclic principles whose existence predates modern financial markets. This article focuses on the Principle of Commonality, a concept introduced to the investment community by J.M. Hurst in the 1970s. This principle, which some view as a rediscovery of an ancient, overarching force governing human affairs, asserts that the cyclic behavior across disparate financial instruments is fundamentally synchronized.

Synchronization Across Unrelated Assets

Specifically, the Principle of Commonality dictates that the cyclic troughs of an equity, such as Apple Computers, should temporally coincide with the same troughs of an entirely unrelated stock. This implies a profound similarity among the underlying cyclic models of all negotiable equities. Any observed divergence between these models is primarily attributable to company-specific fundamental factors, rather than structural differences in the cyclic framework itself.

Hurst suggested a practical application: analysts can leverage the insights gained from the cyclic analysis of one or more instruments to expedite the analysis of a new instrument. Given the near-synchronous timing of corresponding cyclical troughs, this cross-instrumental reference significantly reduces the time required for a comprehensive cyclic evaluation. However, it is crucial to acknowledge a critical caveat: the Principle of Variation, specifically its third type, which describes variation from the Principle of Commonality.

Expansion and Further Research

Subsequent research, exemplified by the work of CVC (as referenced in the original text), adopted a broader scope by incorporating commodities, international stock markets, and various economic series. This expanded investigation concluded that the Principle of Commonality is applicable across all asset classes, suggesting the existence of a single, unifying market dynamic that has been the subject of long-standing inquiry. Current researchers build upon these foundational findings, aiming to refine and elaborate upon the observed patterns and underlying causal mechanisms, which all point to an all-controlling, single, and invisible force that might be attributed to, by many, as the Divine.

The Holy Bible, Daniel 4:35 KJV

Global Scope and Historical Context of Commonality

The force underpinning the Principle of Commonality is understood to be global in nature, extending beyond the confines of any single economy. This realization mirrors the historical progression from polytheistic to monotheistic belief systems, suggesting a human tendency to recognize a singular, overarching influence that is closer to the truth.

And your god is one God. There is no deity [worthy of worship] except Him, the Compassionate, the most Merciful: the Holy Quran, Surah Al-Baqarah (The Cow), 2:163

Trans-Historical Persistence

The continuity of economic waves into the future is projected based on their persistent presence throughout recorded data (which is generally considered to commence around 1000 AD in certain contexts). By extrapolation, it is posited that these waves existed before 1000 AD. Consequently, the Principle of Commonality is assumed to be a trans-historical phenomenon, having been operational even before the genesis of recorded pricing data. Historical observation supports this, noting that advancements among diverse human populations during periods like the Stone Age, often characterized by a lack of trade, still exhibited temporal synchronicity in developmental progress. The Bronze Age also proves this phenomenon, which was similar to the prior rise (Stone Age) in terms of temporal synchronicity.

Variation in Cyclical Expression

While the initiation and conclusion of economic or social waves occur within a narrow, synchronized time range across all economies, it is critical to recognize significant differences in the cyclical expression of the wave. These variations include:

• Cyclical Position of the Peak: The time-based location of the wave’s zenith.
• Price Relationship: The relative price change between the wave’s start and its end.
• Amplitude: The magnitude of the wave’s movement.
• Fundamental Factors: The highly unpredictable local effects of company- or economy-specific fundamentals on the various instruments.

Thus, the Principle of Commonality establishes a temporal synchronization of troughs (start and end points), but permits substantial variance in the local characteristics (peak position, amplitude, and price movement) of the wave’s manifestation.

And every nation has its appointed term; when their term is reached, neither can they delay it nor can they advance it an hour (or a moment): the Holy Quran, Surah Al-A‘rāf (The Heights), 7:34.

The verse quoted from the Quran and presented above suggests that the position of cyclical peaks can differ among different nations and economies, as presented in Figure 1.

Figure 1

The application of the Principle of Commonality is empirically supported by the analysis of major economic cycles, such as the Kuznets’ Swing (an intermediate-range economic cycle, typically 15–25 years). As presented in Figure 1, the peak of this global cycle occurred at notably different times in the instruments presented: 2006 in Saudi Arabia and 2019 in the United States.

Despite this significant temporal divergence in the peak location, a key observation validates the commonality principle: the cyclical trough (the starting and ending points) exhibited remarkable synchronization. Specifically, the Kuznets’ swing began in March 2003 across both instruments (with only a minor difference of a few months observed in related commodities) and concluded with the global low associated with the COVID-19 pandemic in 2020.

Minor discrepancies observed in the timing of constituent sub-waves can be attributed to the third type of variation: the variation from the Principle of Commonality. These slight temporal shifts are generated by unique fundamental factors specific to each instrument or national economy, which influence the local trajectory but do not override the global synchronization of the primary troughs.

We now transition our focus to examine examples involving cycles of a greater magnitude than the Kuznets’ Swing.

Figure 2

Empirical examination, utilizing continuous commodity price plots and the S&P 500 index dating back to 1789 AD, strongly suggests that a majority of cyclical troughs coincide temporally across both instruments. Based on established Hurst cycle analysis, it is asserted that over 90% of these troughs exhibit synchronization.

The majority of the action of the single global force is, to a certain degree, anticipatable through the application of the Economic Wave Theory. This predictive capacity relies on the premise that the future social and economic environment can be accurately projected. By studying similar historical environments, a high out-of-sample correlation can be anticipated. This confidence stems from the fundamental assumption of an unchanging human nature, implying that current participants will behave in a highly similar fashion under comparable circumstances. Historical precedents, frequently documented in ancient texts, confirm society’s tendency to repeat past errors when subjected to analogous environmental conditions.

The Holy Bible, Ecclesiastes 1:9

Given the conclusion that the global social and economic environment can be anticipated, the future effect of the singular force from a political, economic, and social perspective on different nations can be predicted by referencing the historical effects observed during similar past global environments. This methodology results in a high price correlation coefficient (often exceeding 0.8 after adjusting for the Principle of variation), which forms the basis for advanced cyclical forecasting.

Figure 3

Figure 3, which plots the price of Soybeans (yellow) against the Saudi Arabian stock index, provides additional empirical evidence for the Principle of Commonality. Despite these being two completely unrelated markets, the data displays a strong temporal synchronization concerning all major and many minor cyclical troughs.

The observation that the current cyclic models for both instruments are extremely similar directly contradicts the expectation that unrelated assets should exhibit divergent cyclic behavior. This finding reinforces J.M. Hurst’s proposition that a completed cyclic analysis on one instrument can be effectively utilized to initiate and expedite the analysis of any other distinct instrument, thereby confirming the existence of a unifying, underlying market force.

Figure 4

Figure 4, which plots the German DAX (yellow) alongside the Saudi Arabian stock index, provides a compelling example of the Principle of Commonality operating across major national equity markets. Despite being geographically and economically distinct, the data reveals a marked temporal synchronicity of troughs at multiple hierarchical cyclic levels.

Specifically, synchronization is evident in the shorter-term 18-month wave, the intermediate 54-month (Kitchin wave), and the longer-term 9-year (Juglar wave) price cycles. This consistent alignment of cyclical low points across major international indices further solidifies the hypothesis that a single, global, synchronized force dictates the fundamental rhythm of financial markets, along with local economic and fundamental factors.

Conclusion

The analysis strongly supports the Principle of Commonality, asserting that a single, global, synchronized force governs the fundamental rhythmic timing of financial and economic cycles. Empirical evidence across diverse and unrelated instruments—including the S&P 500, commodities, and international indices (e.g., Saudi Arabian and German DAX)—demonstrates consistent temporal synchronization of major and minor troughs, even while allowing for variance in peak position and amplitude due to local fundamental factors. This robust alignment, observable across historical periods and different cyclic wavelengths, validates J.M. Hurst’s principle of Commonality beyond a reasonable doubt. Ultimately, the consistent synchronization of cycles across disparate assets offers powerful predictive capability by the application of the Economic Wave Theory, relying on the premise of unchanging human nature that leads to similar behaviour under similar global economic environments.

Is He [not best] who begins creation and then repeats it and who provides for you from the heaven and earth? Is there a deity with Allah? Say, “Bring forth your proofs, if you should be truthful.”: The Holy Quran, Surah An-Naml (The Ants), 27:64.

Today, we can confidently state that we have brought forth our proofs in this article of a mysterious, dominant, and single force that is behind almost all fluctuations in the affairs of men. We can only ask God to grant us wisdom to recognize His design and join us with the righteous after we fulfill our appointed term in harmony with His will.

Thank you,

Ahmed Farghaly

Founder & CEO of Cyclic Vibrations Consultancy