Capitulation Taking Hold…
July 2015 – The middle third of 2015 is well underway and market action is powerfully validating the outlook for May–August 2015. As has been the case all year, the Dow Jones Transportation Average is leading the way and already pinpointing when & where the first phase of ‘capitulation’ could reach fruition. It would not be surprising if that were the first Index to bottom. To lay thegroundwork for the latest analysis, it is vitally important to first review what was written two months ago (May 2015 – Stock-flation II)…
Mid-to-Late-August Downside Target
06/30/15 – Stock Indices are fulfilling diverse cycles & indicators, most of which project a significant drop (20% or more) between late-April & late-Sept. 2015. These have all been discussed at length (and can be studied/reviewed in previous publications), so a brief recap is all that will be included this month:
1- 40-Year Cycle of Stock-flation – an inflationary advance in equity prices from 1974 into 2014. If accurate, 2014 should be the highest yearly close and 2015 should close lower.
2 – 80-Year Cycle of Economic Malaise & Revolt (1695–1775–1855–1935–2015). Each (prior) phase of this cycle has triggered economic revolts – in one form or another. In many cases, panics and/or crashes were seen in the ‘7’ year – including the Panic of 1857and the second stock market crash of the 1930’s the Crash of 1937.
3- 17-Year Cycle of Financial Crises – an international phenomenon perpetuated by diverse triggers around the globe. It has createdstock market declines between late-April and late-Sept., most recently in 1998 & 1981. 2015 was/is next.
The related mid-points – in 1973/74 (prior to 1981) and 1990 (between 1981 & 1998) provided similar, corroborating declines. That creates a corroborating, ~8.5 Year Cycle of similar corrections… that also recurs now.
4 – ~7-Year Cycle of Stock Market Peaks – a cycle that separates the March 2000 & Oct. 2007 highs and projected another peak for May 2015.
5 – 15–16 Month (~66-Week) Cycle. The Nasdaq 100 has a 66-Week Cycle – creating lows in August 2011, Nov. 2012 & Feb. 2014 – that projected a subsequent high for late-April/early-May 2015. It peaked on April 27, 2015.
6 – The related 32–33 Week Cycle projected a peak during the weeks of April 27–May 1st and May 4–8th, 2015 – perpetuating a 32–33 week low-low-low-low-high-(high) Cycle Progression (with an ensuing peak – more likely to be a lower peak – projected for Dec. 2015).
That should be followed by a drop of at least 16 weeks (1/2 of 32–33 Week Cycle) and possibly 20 weeks (.618 of 32–33 Week Cycle)… into mid-August–mid-Sept. 2015…
Bottom Line: Very little has changed since late-2014, when the Indices were projected to begin a slow, gradual topping process that should then lead to a more pronounced decline in May–Sept. 2015. All these cycles, market analogs, trend reversal signals & technical indicators projected an accelerated decline beginning in late-June.
At the same time, China’s lead Index (Shanghai Composite) began plummeting and quickly shed over 20% in less than 3 weeks. It has a lot more downside potential. And, of course, the escalating ‘Greek Tragedy’ continued to unfold.
…the DJ Transports maintains its role as lead Index, plummeting to new 8-month lows immediately after perpetuating the ~8-week/56–57 day high-high-high-high Cycle Progression discussed last issue. The latest high – anticipated around June 19th – was expected to trigger a more accelerated drop.
That is exactly what is unfolding as it heads toward 6–12 month support – and its minimum/initial downside target at ~7600–7700/DJTA. Ultimately, however, it could make it down to ~5,500/DJTA.
On a 1–3 month basis, the DJTA is expected to drop into late-August – when a ~90-degree cycle recurs. The Transports topped in late-Nov. 2014 and then set a secondary high in late-Feb. 2015 – 3 months/~90 degrees later.
They then plummeted into late-May – ~90 degrees later – a bottom that held for several weeks. The next phase in this ~90-degree high-high-low-(low) Cycle Progression is late-Aug. 2015. That also fits nicely with the 7-Year & 17-Year Cycles just discussed.
May–August 2015 ‘Capitulation Phase’ Unfolding…
DJ Transports Leading Way; Drop into late-August & down to ~7600 Expected!
Late-Dec. 2015 Ushers in Subsequent Danger Period.
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