August ’19 Danger Period II: Global Equities Concur – Aug. Sell-off Inevitable! Europe/Canada Trigger Sell Signals… Why is Aug. ’19 Plunge Likely??
07/30/19 INSIIDE Track – “The European STOXX 50 Index did rally to new 2019 highs, spiking above its May 3 peak and coming closer to retesting its Jan. ‘18 peak. This index is providing multiple signals of a developing peak, with cycles and timing indicators corroborating…
The STOXX 50 Index rallied into mid-year, fulfilling its intra-year uptrend (that has been intact since late-Jan.) and setting its highest weekly close on July 5. That completes the upside objective for an intra-year uptrend. However, it had not yet completed a textbook rebound/retracement target.
So, it retested that high on July 22 – 26, completing a 30-week rebound (.618 of the 48-week decline that preceded it – from Jan. – Dec. ’18). On a timing basis, it rebounded .618 while on a price basis it rebounded almost 100%. If this high holds, it would also reinforce a future cycle low in the final weeks of 2019. Selling has already begun.
On a daily & weekly basis, there were two revealing facets to that latest spike high (that triggered an immediate and abrupt reversal lower). The first is that it surged right to its weekly LHR (extreme upside target for last week) and held. More intriguing, however, was the action of its daily trend pattern…
While selling off from its initial July 4 peak, the STOXX 50 Index turned its daily trend down. It then triggered a reactive rebound, during which the STOXX 50 neutralized its daily downtrend multiple times. However, it never reversed that trend up. At the very least, that signals a multi-week top and projects a late-July/early-Aug. drop back to xxxx.
Taking this analysis 360 degrees and going back to the broader perspective, the STOXX 50 continues to adhere to a classic ~2-year cycle more consistently than almost any other index. If viewed a little less concise – and treated as a 23 – 26 month cycle – European stocks have vacillated in sync with that rhythm for (at least) the last two decades.
In this century, it began with a plunge into March ‘01, when a 3 – 6 month low was set. It subsequently resumed its decline and plummeted into March ‘03 (24 months later) when a multi-year bottom was set. Exactly six years later (3 phases of that 24-month cycle), the STOXX 50 set its major low in March ‘09. In between, it set two pivotal lows – each of which spurred surges to new multi-year highs – in April ‘05 and March ‘07.
Following the major low of March ‘09, the STOXX rallied into Feb. ‘11 and then set a series of ensuing highs – in line with this 23 – 26 month cycle – in May ‘13, Apr. ‘15 & May ‘17. It set its highest monthly close in April ‘19 but spiked to its highest intra-month high in July ‘19 – 26 months after May ‘17.
If this peak holds, it would project intense focus on the next phase in ~2Q 2021, which is also the next phase of an over-arching ~6-year cycle that has timed three of the most decisive turning points of this century (March ‘03, March ‘09 & April ‘15). A current peak in June/July ‘19 would also perpetuate a ~50-month/~4-year high (Feb. ‘11) – high (Apr. ‘15) – high (June ‘19) Cycle Progression.
Canada’s TSX 60 Index has struggled for the past three months after surging to new highs leading into late-April. After that peak, it turned its weekly trend down and then rallied enough to neutralize its weekly downtrend multiple times… but not enough to turn that weekly trend back up.
Consequently, it is entering the time when a drop to the early-June low is likely. And that decline, if it materializes, could easily morph into a decline of a higher magnitude. On that basis, it needs a weekly close below 956 to elevate this correction and project a larger-scale decline into its next 3 – 6 month cycle low in mid-Dec. ‘19 – mid-Jan. ‘20.
Looking out a little farther, the TSX 60 has the potential to stretch a final high into 3Q/4Q 2020 – the latest phase of a ~6-year cycle that has created a ~6-year low (Sept./Oct. ‘02) – low (Nov. ‘08) – high (Sept. ‘14) – (high; Sept. – Nov. 2020) Cycle Progression. (Of the three prior phases, two of them also produced multi-year lows – in 3Q ’84 & 3Q ’90. 3Q ’96 did not fulfill this cycle.)”
Europe & Canada Equity Markets Concur – Stocks in for rough ride in August 2019! DJ Industrials reinforce projected sell-off from mid-July into late-Aug. Monthly trend signals could elevate that decline. 40-Year Cycle AND 4-Year Cycle project sharp drop in Aug. ‘19… with a Aug. ’15-style sell-off increasingly more likely!
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.