Why the 2-Year Cycle Projects an October Plunge in Stocks.
Why the 2-Year Cycle Projects an October Plunge in Stocks.
09/26/18 Weekly Re-Lay Alert – 720 Degrees: What the 2-Year Cycle Reveals: “One of the most consistent cycles in equity markets is an approximate 2-Year Cycle (accounting for similar consistency in a corresponding 4-Year Cycle and even 8-Year Cycle). 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.
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. A perfect example involved the following sequence on a 2-year interval:
– A moderate sell-off that bottomed on Feb. 3 – 12, 2014 (~1250/DJIA points or about a 7.5% decline).
– A sell-off of one larger degree that bottomed on Feb. 3 – 12, 2016 (~2500/DJIA points or about a 14% decline)
– A sell-off of one larger degree that bottomed on Feb. 3 – 12, 2018 (~3250/DJIA points or about a 12% decline).
Previously, the DJIA also had a decline of 900 points or 8.3% that bottomed on Feb. 3 – 12, 2010.
In 2014, it took 4 – 5 months for the DJIA to exceed its previous peak (the peak before that sell-off). In 2016, it took 5 – 6 months to do the same thing. In 2018, it took almost 8 months.
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, the jury is out. But the DJIA just spiked to a new high on Friday, Sept. 21. So, we remain within a week of that peak and other factors – that have been in place and in focus throughout 2018 – argue for a quick sell-off in this time frame (leading into an anticipated Oct. 2018 cycle low).
Corroborating that outlook is another case in point (of the 2-Year Cycle):
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 have shown signs of rolling over on an intermediate basis for the past three weeks. In addition, the entire equity complex has been expected to set a pivotal low in Oct. 2018 – after a sharp drop…
The bottom line is that this 2-Year Cycle has consistently timed sharp corrections – concentrated between mid-Sept. and mid-Oct. (though commonly stretching out a few more weeks in each direction).
And, it dovetails closely with the current action of the Nasdaq 100 and the action recently described in key tech stocks…
Stock Indices remain mixed with the DJIA spiking to new highs and fulfilling its weekly trend pattern (as well as 6-week & 12-week Cycle Progressions) as the NQZ increases the likelihood for a ‘c’ wave decline…
As explained last week, that is corroborated by stocks like GOOGL, which has corrected for ~8 weeks since its July ’18 peak (see 9/22/18 Weekly Re-Lay for details)… several technical signals are lining up to project a new decline.
AMZN’s daily trend and daily 21 MAC (though it is not yet descending) are giving a related signal but not yet as negative… AAPL is similar.
These tech stocks are mentioned as a corroborating factor for what the NQZ appears to be reflecting…
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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.