Crash Cycles III

40 Year Cycle of crashes

Late-2016 Remains Focus for Next Phase of Crash Cycles (late-Apr–late-Sept. ’15 = First Phase).  Intervening Stock Market Low Projected for late-June.

 

Stocks Perpetuate 2000-2002 Parallels;
Late-June = Next Cycle Low…
Consolidation/Volatility Likely into 4Q ‘16.  

 

Since early-2015, the stock market outlook has been for a 15–18 month topping process – similar to what was seen in the DJIA in Jan. 2000–July 2001 – before a more sustained & convincing decline takes hold… in late-2016.  Corroborating cycles, wave analysis, fundamental forces & other contributing factors point to two specific periods (in 3Q & 4Q ’16) for successive declines that should validate this outlook.

In the meantime, that uncanny convergence of factors will continue to be detailed in the Weekly Re-Lay & INSIIDE Track (since the specifics are reserved for subscribers), and the following update should give visitors a glimpse of what has been – and still is – expected before a true bear market takes hold in late-2016–2017

 

03/19/16 Weekly Re-Lay:  “Stock Indices have rallied sharply after fulfilling monthly cycles lows in January & weekly cycle lows in February.  Those lows increased expectations for future lows while ushering in the potential for intermediate rebounds that continue to unfold…3–6 month & 6–12 month traders should have covered short positions with gains…

Stock Indices continue to rally after reaching extreme support on Jan. 20th – and testing the yearly SPS levels (projected intra-year support) for 2016 – while fulfilling intermediate cycles bottoming in late-Jan./early-Feb. 2016…In between late-January & (late-June, a lot of volatile consolidation is on tap… much like ~15 years ago.

At the risk of sounding like a broken record, this again validates & reinforces expectations for 2015/2016 to look a lot like 2000/2001 – when almost every sharp (1–3 month) decline was quickly met with a nearly equal (but slightly less) powerful 1–2 month rebound – most recognizable in the action of the DJIA.

If one looks at a DJIA weekly chart – from March (or even Jan.) 2000 until July/Aug. 2001 – what is apparent is that it was a very stealthy bear market unfolding for about 18 months.  It was only in late-August 2001 (as if the market knew that something was amiss) – 19 months after the DJIA had peaked in Jan. 2000 – that an accelerated decline began to take hold.

(Even the Sept. 2001 spike low, however, was quickly met with another round of buying that took the DJIA back up over 75% of its May–Sept. ’01 plummet… perpetuating that pattern – the same one that has been forecast for 2015/2016 and likely stretching into 2017.)

If one estimates a similar scenario for the current market, from the May 2015 peaks in most Indices, that would project more of the same volatile swings in the Indices until 4Q 2016 (right after Election 2016… if that has anything to do with a more convincing sell-off; keep in mind that it was the 4Q 2000 Election debacle that created extreme uncertainty in the markets).

Although I do NOT expect an exact replica – and am NOT advocating trying to use the 2000/2001 decline as a precise roadmap – it can be instructional to compare the action of the past year to the action in 2000 and note the similarities… 

In 2000, the Indices created a series of divergent highs with the DJTA peaking first (in May 1999) and seeing an initial 10-month decline that encompassed the lion’s share of its overall, multi-year drop.  

In 2015, the Indices created a series of divergent highs with the DJTA peaking first (in Nov. 2014) and seeing an initial 9-month decline that encompassed about half of what was projected for its overall, multi-year drop.  

In 2000, the DJIA experienced two significant declines in the first 9 months – with the second low retesting the first low before rebounding sharply.  The overall drop was ~17%.

In 2015, the DJIA experienced two significant declines in the first 9 months – with the second low retesting the first low before rebounding sharply.  The overall drop was ~16%.

In 2000/2001, the DJIA then rebounded for about 2.5 months – gaining 15% in that period.

In 2016, the DJIA has rebounded for about 2 months – gaining 14% so far…

In 2001, the DJIA then dropped sharply to new lows and bottomed almost exactly 5 months from its preceding double bottom.

In 2016, the DJIA is projected to see another sharp drop into June 2016 – almost exactly 5 months from its preceding double bottom.

As those comparisons reveal, the Indices have adhered VERY closely to the 2000/2001 analogy and have the potential to extend that adherence into (at least) June 2016.

In the near term…an intervening low on April 4–8th would be a more convincing validation to expectations for a late-Junelow…”

Crash Cycles   Crash Cycles II