CMT CMT Market Cycles

Question 1

According to Dow Theory, which phase of a bull market is characterized by broad public participation and rising prices across all sectors?

Accepted Answer

Public participation phase

Answer

The public participation phase is the second stage of a Dow Theory bull market, where the majority of investors recognize the uptrend and actively buy, driving prices broadly higher.

Question 2

Elliott Wave Theory posits that market prices move in a pattern of how many waves in the direction of the main trend?

Accepted Answer

5

Answer

Elliott Wave Theory identifies five impulse waves in the direction of the main trend (waves 1, 2, 3, 4, 5) followed by three corrective waves (A, B, C).

Question 3

In Dow Theory, a 'secondary reaction' in a bull market is best described as:

Accepted Answer

A short-term correction of one-third to two-thirds of the prior primary move

Answer

A secondary reaction in Dow Theory is an intermediate counter-trend move that typically retraces one-third to two-thirds of the prior primary trend move.

Question 4

The Kondratieff Wave (K-Wave) cycle is associated with an approximate period of:

Accepted Answer

50–60 years

Answer

The Kondratieff Wave is a long-term economic cycle of approximately 50 to 60 years, identified by Russian economist Nikolai Kondratieff based on capitalist economies.

Question 5

The presidential election cycle theory suggests that US equity markets tend to perform best during which year of the four-year presidential cycle?

Accepted Answer

Third year (pre-election)

Answer

The presidential cycle theory holds that the third year (pre-election year) typically produces the strongest equity returns as incumbents enact stimulative policies ahead of the election.

CMT - Chartered Market Technician Practice Test

CMT - Chartered Market Technician Practice Test

CMT CMT Market Cycles