Why a 2 – 3 Day Bounce Could Extend the 2-Year Cycle (October ’18) Plunge in Stocks.
Why a 2 – 3 Day Bounce Could Extend the 2-Year Cycle (October ’18) Plunge in Stocks.
10/11/18 INSIIDE Track Stock Index Update: “Stock Indices have dropped sharply, once again validating and fulfilling a recurring 2-Year Cycle that projected a significant correction of potentially 10% or more surrounding the first two weeks of October.
One of the most consistent cycles in equity markets is an approximate 2-Year Cycle (accounting for similar consistency in a related 4-Year Cycles and 8-Year Cycles). This 2-Year Cycle has multiple facets, including the timing of related moves at a ~24-month interval. This is more likely when the market has been in a similar trend for several years, as it has in 2009 – 2018.
In many instances, those similar moves will be on progressively higher or lower degrees (magnitudes) due to the progression of higher and lower magnitude waves.
In 2010, 2014 2016 & 2018, the DJIA experienced similar declines bottoming on Feb. 3 – 12. Following those declines, it took 4 – 8 months to recover and eventually spike to new highs.
In 2014, that subsequent spike high immediately led to a ~2-week reactionary pullback.
In 2016, that subsequent spike high immediately led to a 9 – 10-week reactionary pullback.
In 2018, it was expected to lead to a similar 2 – 4 week drop as was seen in early-2018, early-2016 and Aug. 2015.
That was corroborated by the fact the Nasdaq 100 and several key tech stocks had already set multi-month highs – in August 2018 – and were expected to decline (on balance) into October, with the sharpest drop expected during the first 2 – 3 weeks of October.
The DJIA spiked to a new high on Friday, Sept. 21 – identifying the time for a sharp correction – and has since validated that 2-Year Cycle, plunging over 2,000 points in less than two weeks and right to 2 – 3 month support around 24,965/DJIA.
That sell-off, as well as the leading decline in the NQ-100 (~800 points or over 10%), has powerfully fulfilled other aspects of that uncanny 2-Year Cycle. To reiterate:
In early-Sept. 2012, equity markets peaked and began to roll over on an intermediate basis. They sold off during Oct. and the first two weeks of November, spiking down to pivotal support and bottoming. The entire correction lasted about 6 weeks with the majority of selling occurring in the final ~3 weeks.
[Surrounding that move by one year on each side, equities experienced related 3-week sell-offs from mid-Sept. into early-Oct. – in 2011 and 2013.]
In early-Sept. 2014, equity markets peaked and began to roll over on an intermediate basis. They sold off during the first 2 – 3 weeks of October, spiking down to pivotal support and bottoming. The entire correction lasted about 6 weeks with the majority of selling occurring in the final ~3 weeks.
Two years later, in mid-Sept. ’16, equity markets peaked and began to roll over on an intermediate basis. They sold off during the final two weeks of October and first week of November, spiking down to pivotal support and bottoming. The entire correction lasted about 6 weeks with the majority of selling occurring in the final ~3 weeks.
Two years later, some equity markets (Nasdaq 100 and several key tech stocks) peaked in the final days of August and showed signs of rolling over on an intermediate basis. Following a corroborating 1 – 4 week sell signal in the Nasdaq 100 futures (in early-Oct., up to 7690/NQZ; see Weekly Re-Lay), all of the indexes were projected to suffer sharp drops during the Oct. 3 – 17 time period.
The potential for an Oct. sell-off was corroborated in late-Sept. by the Russell 2000 (turning its weekly trend down), and the NYA & DJTA (daily indicators).
And, since the markets entered the final 10% of their expected low – low cycle in late-Sept. (late-March – late-Oct. 2018), the first two weeks of Oct. was the time set up perfectly for an accelerated decline. It did not disappoint as equity markets did precisely that, plummeting during the first two weeks of October!
The Nasdaq 100 just hit the initial profit-taking level for that sell signal (7021/NQZ) – while holding just above weekly 21 Low MARC support (6887/NQZ) even as the DJIA attacked 2 – 3 month support and weekly 21 MARC support coming into play just below 25,000/DJIA and the S+P attacked decisive trend support surrounding 2700/ESZ.
That could allow for a quick, sharp rebound beginning on Oct. 12. Depending on the action of Oct. 12 & 15, another 1 – 2 week sell-off is still possible. The Weekly Re-Lay will update and elaborate on these shorter-term trends and signals… [reserved for subscribers].” TRADING INVOLVES SUBSTANTIAL RISK!
Equities have fulfilled the first phase of the 2-Year Cycle – plunging 8 – 10% during the first two weeks of October. A sharp, 2 – 3 day rebound is poised to take hold on Oct. 12 and is likely to lead to a subsequent 1 – 2 week sell-off, leading into important cycle lows in late-October.
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.