How the DJIA Just Signaled a 5th of 5th Wave Peak – Projecting a Bearish 4Q ‘18.
How the DJIA Just Signaled a 5th of 5th Wave Peak – Projecting a Bearish 4Q ‘18.
09/28/18 INSIIDE Track: Stock indexes have maintained the potential for a quick, sharp drop in October – similar to late-Jan./early-Feb. ’18 – and the subsequent setting of a new multi-week/multi-month low.
That remains in the context of another expected peak in Nov./Dec. 2018 – in line with the next phase of the 10-month Cycle Progression that has governed equities for several years. Leading into 2018, two primary peaks were expected – in late-Jan/early-Feb. and then in Nov./Dec. ’18 – with an intervening peak in June/July ‘18. The two primary ones incorporated phases of the ~5-month and ~10-month cycle. The intervening peak was only the ~5-month cycle.
The weekly trends were, and still are, expected to be the ultimate filter for mid-year and then late-year – identifying the likely positioning (higher/lower) of that next peak. When equity indexes could not turn their weekly trends down in Feb. (nor in late-Mar./early-Apr.), they projected a rally back to the highs.
Since those lows, the indices have steadily moved back toward their highs – even while setting an intervening peak in mid-June that could only hold until late-July – with the DJIA being the third and final index to fulfill this objective, on Sept. 21 (peaking ~180 degrees from its low weekly close on March 23).
[One of the three primary stocks (NFLX) – that until July ‘18 accounted for 70 – 80% of the 2018 gains in the NQ-100 AND S+P 500 – peaked on June 22 and has traded lower since. Along with other ‘secondary’ stocks that peaked in that time period, it reflects a stronger influence of the intervening ~5-month cycle.]
The DJIA finally set those new highs even as the Nasdaq-100 was slowly fulfilling the intermediate potential for a correction from early-Sept. into mid-Oct. Bellwether stocks like AAPL & AMZN also remain below their early-Sept. peaks. That is one reason there remains the potential for another leg down in October. Another reason is described on page 5.
A third reason has to do with the DJIA’s multi-year (since ‘09) wave structure. From the 2009 low, the DJIA rallied into May ‘11 (‘1’ wave), corrected into Oct. ‘11 (‘2’), advanced into Apr. ‘15 (‘3’) and corrected into Aug. ‘15. It then began a 5th wave rally.
That 5th wave broke down into 4 waves, as of the Feb./April low. It then entered a new (‘5’ wave) advance, reinforced by the weekly trend pattern, with new highs in focus. With the recent spike high, the DJIA has at least provided the minimum necessary to fulfill a ‘5th’ of ‘5th’ wave advance.
The Nasdaq 100 is in the process of generating a near-term (1 – 4 week) sell signal up to 7690/NQZ that could trigger this second sell-off. The opening days of Oct. must confirm that… (see Weekly Re-Lay for details).
3 – 5 year equity traders & investors could have lightened up (liquidated) 10 – 20% of long positions in early-2018. A weekly close below 2x,xxx/DJIA could spur another phase of liquidation.”
Equity markets are entering an extremely precarious time based on a combination of cycles and the culmination of a multi-year bullish wave structure that should give way to multiple double-digit (%) declines. The 2-Year Cycle is projecting a sharp (10 – 15%) sell-off in October that is expected to usher in a 1 – 2 month low in late-October – acting as a precursor to a more devastating sell-off soon after.
A lower peak in late-Nov./early-Dec. would corroborate that and usher in a second bearish period in 4Q 2018. Reinforcing that, the DJIA remains on track for a likely drop to 22,100 in 2018.
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.