Stocks Completing Latest Surge

Stocks Completing Latest Surge; 
2000/2001 Parallels Abound!
Dec. ’15–Jan. ‘16 = Next Bearish Cycle.

10/30/15 INSIIDE TrackStock indices fulfilled the first phase of 2015/2016 Crash Cycles & then entered sharp rebounds, reinforcing the parallels to 2000/2001.  The next (bearish) phase is expected to take hold after mid-Dec

Stock Indices fulfilled the majority of what was forecast for the middle half of 2015 – the ’Capitulation Phase’ of the 40-Year Cycle of Stock-flation.  That was expected to yield another strong rally in October, fulfilling 2015 analysis for declines & rallies that are similar in magnitude (similar to the period between mid-2000–mid-2001).  As described in the May 2015 Stock-flation II Report:

The month of May begins the second third of 2015… when things should get a lot more interesting.  When looking at 2015, I have been viewing it from a perspective of ‘thirds’ – or 4-month periods.  One of the reasons has to do with the diverse concentration of cycles…They tend to divide the year into thirds… 

             Since late-2014, I have repeatedly warned that this (expected) transition – from bull to bear – would be a slowly-evolving process, full of brief (but sometimes sharp) declines AND rallies.  The first 1/3 of 2015 was projected to be the transitional phase.  

             As a result, that would be expected to be a lot of sideways action to begin 2015…If weekly trends turned down in mid-April, that would project a quick, 2–3 week reactive rally – fitting perfect with the ensuing cycle highs.  At the same time, multi-year cycles were projecting highs in European Indices for March/April 2015…By the time October 2015rolls around, the Indices should have experienced Culmination (late-2014), Distribution (1/3 2015) & Capitulation (2/3 2015)…

             Corroborating this pivotal period – and culminating the first 1/3 of 2015 – a nearly-ubiquitous cycle (and most of its multiples/divisions) also came into play on April 27–May 8, 2015.  In a way, it is like the first third of 2015 handing the baton to the second third… 

             For the last ~6 months, there has been one overriding expectation for an expected reversal in Stock Indices.  That expectation has been that it would be a slow process – with each sell-off being met by a nearly-equal advance… and vice-versa.  That continues to be the case.  

             However, the second third of 2015 – May–August 2015 – is when the declines are likely to begin overtaking the advances (in magnitude) and setting a progression of lower lows, instead of ascending or lateral lows.

That analysis – linked to the transitioning 40-Year Cycle – overlapped & reinforced 17-Year Cycle analysis anticipating ~20% declines in most Indices, during the middle chunk of 2015.  And that was corroborated by related 7-Year Cycle analysis, projecting a double-digit (%) decline beginning in May ‘15.

It was the synergy of all these cycles – as well as corresponding monthly cycles (7.5–8 month & 15–16 month) & weekly cycles (32–33 & 66-Week, as well as others) – that projected a very bearish 3Q 2015.  The mid-May–late-August period had the greatest synergy with expanding rings of remaining cycles spreading out in both directions.  Sell signals, based on diverse technical indicators, were triggered in early-to-mid-May, to ‘fire the starting pistol’.

Dozens of bellwether stocks & Indices – domestic & global – suffered losses of 20–40% during the middle third of 2015, showing a convincing sign of ‘capitulation’… bottoming in late-August–late-Sept.  That set the stage for a 1–2 month rebound that – if it adhered to expectations for a 2000–2001-likebear market – would be sharp and begin to convince investors that the worst is behind them.

One Index even projected a retest of its 2015 highs – a result of its weekly trend pattern – and has just fulfilled that.  The Nasdaq 100 could not turn its weekly trend down, during the July/August sell-off – and set the stage for a rebound back to its highs.

The action of October has added another level of validation (and credibility) to the overall 2015/2016 outlook described since late-2014.  8 months ago, it was reiterated in this manner:

      Feb. 27, 2015 – “From the Great Depression DJIA low of 1932, Stock Indices rallied for 40 years into 1972 (with an intervening, 35+% decline 5–6 years prior to that ultimate peak).  That rally carried over into Jan. 1973 – making it a total of 40 years & 6 months – and led to a 50% drop unfolding over the ensuing 2-year period.

      From the Stock-flation DJIA low of 1974, Stock Indices rallied for 40 years into 2014 (with an intervening, 35–50% decline 5–6 years before the present) and have carried over into 2015.  Could a similar 2-year/50% drop unfold once a top is signaled?

      If so, it would also be similar to 2007–2009 when the Indices dropped ~50% in less than 2 years.  It would also be similar to 2000–2002…during which the DJIA experienced multiple 1-2 month rallies & 1-2 month declines, from Jan. ‘00–Jly. ‘01, before the events of 9/11 exacerbated the bursting of the Dot-com Bubble….

      Up until 3Q 2001, the DJIA repeatedly rallied to multi-month highs & looked like it was going to mount a new advance… only to turn back down, on a dime.  It would then drop to multi-month lows & look like it was going to enter a larger decline… only to abruptly turn back up.  That pattern continued for ~18 months even as the bear market was steadily but subtly taking hold.  Only then, did the ‘other shoe’ drop.” 

So far, reinforced by the action of October, that is exactly what has unfolded in 2015… and what could continue to unfold for another 3–6 months.  Just when the market looks like it is breaking out to new highs, it reverses back down.  And just when it looks like a meltdown is about to take hold, it reverses back up.

There is another applicable analogy that I discussed in early-2015, focused on the wave structure of two similar markets (see right column).  It was disguised since the monthly action of the DJIA – over an ~8-year period (1966–1974) – was being repeated by the weekly action of the Russell 2000, over a ~2-year period (late-2014–late-2016??).

That analogy – and those charts – were examined before the Russell 2000 had peaked.  Now that it has peaked, its decline has looked remarkably similar to that of the DJIA in 1973–’74… increasing the potential for this analog to continue unfolding

3/3 2015 – Vacillation

With the end of 2014 timing ‘Culmination’ (of the 40-Year Cycle of Stock-flation), 1/3 2015 representing ‘Distribution’ and 2/3 2015 pinpointed for ‘Capitulation’, the final third of 2015 is pegged for ‘Vacillation’ – as the Indices swing wildly between extremes.

  Continuing volatility expected in Stock Indices, in a close parallel to 2000–2001 (-2002).  15–18 months of congestion was expected, once stocks signaled a top (which took hold in April–June 2015).  That analogy – and the Russell/DJIA comparison – heighten the focus on late-2016 for decision time.  In the meantime, the next down phase is forecast for mid-Dec. ’15–late-Jan. ’16.