Why the 2-Year Cycle (& DJIA Peak) Projects an October Plunge in Stocks.
Why the 2-Year Cycle (& DJIA Peak) Projects an October Plunge in Stocks.
09/29/18 Weekly Re-Lay: “Stock Indices are poised for an October correction, in line with a consistent 2-Year Cycle and following the DJIA’s fulfillment of its weekly trend pattern. The Nasdaq 100 – and several related, key tech stocks – remain below the late-August peaks although the daily trend pattern would allow for a retest of that high. It appears poised to enter a ‘c’ wave decline in the coming week(s)…
Stock Indices have consolidated after the DJIA spiked to new highs while fulfilling 6-week & 12-week Cycle Progressions. That made it the third and final index to fulfill the weekly trend pattern generated in early-Feb. Combined with other indications of upside fulfillment, that ushers in the most likely time for a quick correction.
Although they do not trade in lockstep (often not even close), that is in line with European and Canadian equities that are already in declines and signaling a likely sell-off in Oct. It would also be in sync with the 2-Year Cycle, revisited this past week.
While that repetition might be disguised, due to each move being of different magnitude, it has been consistent.
In 2010, 2014, 2016 and then in 2018, the DJIA suffered intermediate corrections (ranging from 7.5% to 14%) in the beginning of those years, with each sell-off bottoming on Feb. 3 – 12.
In 2014, 2016 & now in 2018, the DJIA eventually returned to its highs and briefly spiked higher. Each time, it has taken the DJIA longer to achieve this.
In 2014 & 2016, those spike highs immediately led to multi-week pullbacks. Could 2018 repeat?
Also, in 2012, 2014 & 2016 (as well as in 2008), equity markets peaked in early-to-mid-Sept. and then corrected for 4 – 6 weeks. In each case, those declines overlapped the first 3 weeks of October. (They also experienced related 3-week sell-offs from mid-Sept. into early-Oct. – in 2011 and 2013.)
The bottom line is that this 2-Year Cycle has consistently timed sharp corrections that usually see their accelerated phase at some point in Oct. The potential for an Oct. sell-off is corroborated by the Russell 2000, which just turned its weekly trend down, and the NYA & DJTA (daily indicators).
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The 2-Year Cycle is projecting a sharp (10 – 15%) sell-off in October that is expected to usher in an important (1 – 3 month) low in late-October – in sync with cycles that have been discussed throughout 2018. A subsequent rally would then set the stage for a more dramatic move to follow.
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.