Stocks Fulfill First Phase
01/20/16 Weekly Re-Lay Alert: “2016 Crash Cycles received more validation, with the Indices fulfilling expectations for another sharp drop following their Jan. 13th cycle high (14-15 day Cycle Progression) and their corresponding tests of daily LHR levels.
That decline – the Second Shoe to drop since mid-Dec. 2015 cycles projected a rapid sell-off – has fulfilled the first important phase for 2016 Crash Cycles – a retest and spike below the August 2015 lows. That could/should trigger a short-term low.
This occurred with perfect timing as those Aug. 24–28th lows represented the weekly 21 Low MARCs for this week (21 weeks from that spike low). By spiking below those lows, the Indices have perpetuated their downtrending weekly 21 MACs – an important confirmation to this early-2016 analysis.
This action is also giving powerful validation to expectations for later this year – leading into pivotal & decisive cycles in late-April/early-May, June & Oct. 2016. In the interim, there is a web of cycles that could extend the current decline – after another brief bounce – into February 2016… the same time that Asian Index cycles (particularly in China) bottom.
In other words, a Third Shoe could drop in the relatively near future.
In the interim, it is important to review a few things that have taken place with today’s spike low:
— The Dow Jones Transportation Average – still the leader in this overall decline – just spiked into the 30+% loss territory, before recovering into the close.
— In doing so, the DJTA exceeded the magnitude of its Nov. ’14–Aug. ’15 decline (it had to drop below 6,500/DJTA to do so) as it came very close to January’s HLS(extreme intra-month downside target) at 6,364/DJTA.
— At the same time, the DJ Composite Average (Industrials, Utilities & Transports combined) spiked below but ultimately closed right at its monthly HLS (5,458)… reinforcing the fulfilled intra-month extreme downside potential.
— The Russell 2K exceeded its initial (June–Aug. ’15) decline – as ‘3’ or ‘C’ waves need to do – & spiked below its monthly HLS as it perpetuated a 14–15 week Cycle Progression.
As detailed & illustrated in the May 2015 ‘Stock-flation Capitulation’ Report, the Russell 2000 weekly chart was a near perfect analog to the DJIA monthly chart leading into Jan. 1973. And that projected a steep decline in the Russell 2000 – in 3Q 2015 through 1Q 2016.
In 30 weeks’ time, the Russell 2K has plummeted more than 25% – shedding over 15% just since the beginning of 2016.
— NQH exceeded its July/August price decline as it retraced 50% (in time) of its intervening rally (14 week rally; 7-week drop).
— The NYSE spiked down to its monthly HLS (9119; extreme intra-month downside target) and reached the 20%-loss threshold for its overall decline.
So, what does this mean for the coming days… and coming weeks??
Stock Indices have fulfilled the potential for another quick, sharp drop from the Jan. 13th high and have reached many crucial downside targets and/or intermediate support levels.
While these are expected to ultimately be broken, it is very common for an initial test to spur a brief rebound. In line with the 14–15 day & 28-day/~4-week Cycle Progressions, this could allow for an intervening high next week (if the Indices hold these lows into/through Friday).
That would set the stage for another decline into February 2016.
3–6 month & 6–12 month traders/investors should have re-entered the short side of the Indices (except NQ) on Oct. 29/30–Nov. 6th (at ~17,780–17,977/DJIA, ~2076–2102.75/ESH, ~10,538–10,641/NYSE) and should now risk a weekly close above the Jan. 4–8th highs (17,405/DJIA, 2043.5/ ESH & 10,039/NYSE).
Traders/investors can cover 25-35% of these short positions now, and look for a rebound to re-establish.” TRADING INVOLVES SUBSTANTIAL RISK.
Stock Indices have fulfilled what was projected for the first danger period of 2016 Crash Cycles. – from mid-Dec. ’15 into late-Jan. ’16… reinforcing this is a ‘do-or-die’ week. As a result, traders can cover up to 1/3 of the short positions – from early-Nov. – and look for a brief rebound. That is expected to spur another drop in Februaryand then a slightly larger bounce into March 2016… before the next phase of Crash Cycles emerges. So, some volatile consolidation is now likely.