The Dow Jones Industrial average is current sitting near its all time high. Since 1999 the Dow has been trading in a channel of support and resistance (8000-12,000). Most people see this as volatile, but in fact this behavior has been one of tight consolidation in preparation for a major move to come.

In the first and second year of any decade, we have seen the market severely underperform. The seventh year is also known to have a negative affect on the market, although not quite as drastic as the first two years. When looking back over a century of stock market returns, one would also notice that the final eighth and ninth year are usually marked by high returns. A historical perspective can be seen below:

• 1928-1929 marked by economic expansion
• 1930-1933 depression
• 1937 correction
• 1981-1982 recession
• 1987 correction
• 1990-1991 recession
• 1998-1999 strong economic expansion
• 2000-2002 recession

According to these market cycles, we should be cautious in October of 2007 as this specific month and seventh year combination may trim portfolio values. Then, it is likely that the market will breakout from consolidation and expand from 2008-2009. If this senario plays out, then be prepared to shift your investment portfolio into fixed income and high yielding securities towards the end of 2009. This should help to avoid any serious downturn in the market between 2010-2012. Preservation of capital will be very important and it is better to be safe than sorry.