Bonds & Stocks Fulfill Multi-Year, 5-Wave Declines; Multi-Month Rallies Likely.
Outlook 2022/2023 – The Curse?
10-29-22 – In late-2021, the impending period of 2022 – 2023 was projected to possess a great deal of similarities & parallels to 1973 – 1974. Stock market structure was set up perfectly – from a cyclic, wave, technical, and price pattern perspective – to corroborate those similarities and usher in a 1 – 2 year bear market.
Cycles ranging from the 40-Year & 20-Year Cycles to a web of related 2-month, 4-month, 8-month & 16-month cycles pinpointed Jan ‘22 (ideally in early-Jan ‘22) as a prime candidate for a decisive and divergent peak when only the last remaining resilient stocks and indexes would set new highs… before the sell-off began.
In 1973 – 1974, the overall stock market sell-off lasted from Jan ‘73 into Dec ‘74. In 2022 – 2023, the sell-off began in Jan ‘22 and has lasted until the present. It was/is another similarity to 1973/74, however, that is worth reviewing now…
Tecumseh’s Curse & 40-Year Cycle
The Curse of Tippecanoe, or Tecumseh’s Curse, is an ’urban legend’ dating back to President William H. Harrison and the 1811 Battle of Tippecanoe. Allegedly, Harrison’s victory over the Shawnee and other tribes led to a curse being placed on American presidents elected during a year that ends in ’0’… in which they would die in office. As a result of our 4-year election cycle, that was a 20-Year Cycle.
When Harrison was elected President (1840), he died within weeks after taking office. That 20-Year Cycle also timed the deaths of Lincoln, Garfield, McKinley, Harding, Roosevelt & Kennedy. It also timed the failed assassination attempt on Reagan. Reagan ‘broke the curse’ and George W Bush reinforced that… but a cycle is still a cycle.
Similarly, a 40-Year Cycle timed the premature exits of Lincoln, McKinley, Roosevelt and the attempt to ‘remove’ Reagan by force. The latest phase in that 40-Year Cycle is 2020 and the election of Joe Biden… the oldest President to ever take office.
A cycle like this could be fulfilled in many ways and the focus is simply on exiting the presidency. A President could step down for multiple reasons, though health would be the least controversial. However, here is one hypothetical (out of many possibilities):
If Republicans regain control of the House and Senate in the mid-term election, what would be their first (and most intense) target? …weakening or paralyzing (politically) Joe Biden by whatever means possible.
While there are many ways they could do that, one of the ‘low hanging fruits’ could be the ongoing investigations into Hunter Biden and his past dealings. The primary investigation has reached a decision point but no charges have yet been filed. However, a legislative shift could lead to new investigations and anything that could hamstring the current President.
If there is anything that directly or indirectly implicates Joe Biden, even his own party might be anxious for him to get out of the way before the 2024 election cycle really ramps up. Any sort of health scare could also intensify the same type of pressure. A ‘health issue’ might make for a convenient reason to step down.
Will 2023 see more similarities to 1974?
Climate Cycles
In the mid-2010’s, INSIIDE Track described a convergence of longer-term climate cycles portending a culminating global warming in the late-2010’s and early-2020’s – leading into a multi-year peak. [NOTE: I am NOT a climatologist or meteorologist. This conjecture is simply based on cycle analysis.]
After a couple decades of fairly level global temperatures, the late-2010’s/early-2020’s fulfilled that outlook. That is also when a Food Crisis was forecast to take hold – driving the price of grains and other commodities substantially higher.
2023/24 is when cycles project a bit of a shift after reaching new extremes. One of those shifts could be seen in the West (as goes CA, so goes the US??)…
Based on analysis of a consistent 6-Year Cycle, a Sunspot-related 11 – 12-Year Cycle and a ~40-Year Cycle, I expect California and other parts of the West to see an abrupt turnaround in precipitation during the 2022-23 & 2023-24 rainy seasons (’water years’).
In recent decades, heavy rain years arrived in 2017 (highest total since records began), 2011, 2005, 1998, & 1993. 6, 12, 18, 24 & 30 years from those spikes pinpoint 2022/23 as a prime candidate for increased precipitation – based on a 6-Year Cycle.
Looking back over the past ~80 years, the water years of 1941, 1952, 1963, 1974, 1986, 1998 & 2011 produced surges in precipitation – averaging about 35% above the annual average amount.
2022/23 & 2023/24 are the next phase in this ~11/12-Year Cycle.
That is also when a 40-Year Cycle comes back into play – linked to increased rainfall in the early-1900’s, early-1940’s & early-1980’s, following extreme dry years in each of the preceding decades.
Following the 1976 year of extreme drought, 1982 – 83 saw consecutive water years of extreme precipitation – combining to create the greatest 2-year period of rain since records began in the late-1890’s.
Could 2022/23 or 2023/24 repeat this pattern and perpetuate that 40-Year Cycle?
Related El Nino cycles focus on 2023/24 for another chance for increased precipitation… based on cycle analysis. That is another factor in this analysis.
Since 2023 is the year with the greatest synergy of cycles related to major solar storms, the next 12 – 18 months could see some abrupt shifts in climate-related events, even if that is only temporary…
Stock Indices declined from their mid-Aug ’22 highs, peaks that fulfilled a myriad of upside targets and set the stage for a new decline. Most other indexes failed to turn their weekly trends up during that rally (into mid-Aug ‘22), signaling subsequent drops back to their mid-June lows.
That was fulfilled, ushering in a likely multi-month bottom in sync with many indicators. Stocks fulfilled analysis for a post-CPI spike low and reversal higher – reinforcing an intermediate bottom, expected to spur rallies into early-Nov and potentially into Dec ‘22.
Mid-Term Election Cycles
This leads into another topic. Mid-term election stock market cycles are worth examining for a minute, since there appears to be a 12-Year Cycle (the closest possible election cycle to the ~11.2-Year Sunspot Cycle that has been cited many times with regard to expectations for 2020 – 2025) with regard to many of the larger 4th quarter stock market gains overlapping mid-term elections.
2022 is the latest of these with strong rallies projected for Oct/Nov ’22. There is a reinforcing ~24-Year Cycle (1974 – 1998 – 2022) that is providing important clues as to how large this rally could be…
1962 – ~12% gain
1974 – ~20% gain (from Oct ’74 low; before dropping back to low in Dec ‘74)
1986 – ~11% gain
1998 – ~20% gain
2010 – 8 – 10% gain
2022 – 15 – 20% gain???
A ~20% gain – seen in 1998 & 1974 (though the Oct/Nov 1974 rally – after advancing 20% from the Oct ’74 low – headed back to its lows in Dec ‘74) – would take the DJIA back to ~34,400/DJIA… its more bullish upside target where many other objectives converge.
That is the same objective that has been cited in related analysis since stock indexes fulfilled forecasts for a violent spike low on Oct 13 and triggered reinforcing buy signals on Oct 19/20. It is also the same level cited in last month’s INSIIDE Track as the rebound targets once the wave ‘5’ declines bottomed. More recently…
10-22-22 – “Stock Indices are steadily advancing with the DJIA joining the Russell 2000 & S+P Midcap 400 in leading this bullish reversal and providing a steady stream of positive signals. A key one was the Oct 14 weekly 2 Close Reversal buy signal – projecting 2 – 3 weeks of subsequent upside…
Corroborating that, the DJIA completed a bullish daily 21 MAC reversal signal – first closing above its declining daily 21 High MAC and then turning the direction of that 21 MAC up within 1 – 2 trading days.
The S+P 500, Nasdaq-100 & Russell 2000 futures all triggered the third consecutive daily 2 Close Reversals higher – a rare 3-Step Reversal higher – with Friday’s outside-day/2 Close Reversals higher.
This comes after many stock indexes perpetuated a ~16-week high (early-Nov ’21)-low-low-low-(low; late-Sept/early-Oct ’22) Cycle Progression that should prompt a 2 – 4 week – and possibly longer – rebound, expected to stretch into (at least) Nov ‘22…
If stock indices manage to turn their weekly trends up in November, they could extend this rebound into Dec ’22 and potentially attack their mid-Aug ’22 highs (4th waves of lesser degree described in Oct ’22 INSIIDE Track) – with multiple levels of key resistance hovering around 34,200 – 34,600/DJIA.
1 – 2 month traders could have entered long positions in stock indexes from the Oct 19 close to the Oct 21 lows… All are now in daily uptrends and could see surges to ~4020 – 4050/ESZ & 12,500+/NQZ.”
Wave ‘5’ Lows Fulfilled?
As stated last month, “For multiple reasons, a low at this time – and near current levels – could usher in a longer-lasting consolidation phase before the next decline. That is reinforced by the overall wave structure in most indexes – that are now fulfilling a type of wave ‘5’ declines.”
What does that usually lead to?
Following a 5-wave decline, a subsequent ‘a-b-c’ rally (one degree higher in magnitude than the mid-June – mid-Aug ’22 rally) would be expected to unfold and ultimately take many indexes back to their mid-Aug ’22 highs – levels that represent the wave ‘4’ rebound peak on the way down.
Those highs are now viewed as the ‘4th wave of lesser degree’ resistance for the ensuing rally. And that (~34,200 – 34,600/DJIA) is where the DJ Industrials possess their greatest synergy of upside targets and intermediate resistance zones.
3 – 6 month & 6 – 12 month (and even 1 – 2 year) traders and investors should have been exiting long positions in early-Sept ‘21. A 1 – 2 month rebound could be seen …
Bonds & Notes are showing signs of a multi-week bottom after spiking down to (or briefly below) monthly support levels during the month (Oct ’22) when they matched the duration of their 2016 – 2018 declines (July ’16 – Oct ’18 & July ’20 – Oct ’22) AND fulfilled an opposing 4-Year Cycle from the Oct ’18 low. (That 4-Year Cycle also timed many highs.)
Corroborating the potential for intermediate lows, they matched the magnitudes of their preceding Mar – Jun ’22 declines at their recent lows. That wave structure, timing, and price pattern analysis reinforced the potential for interest rates to peak in Oct ’22 & usher in a multi-month rebound in related interest rate futures.
On a multi-year basis, inflation remains the primary driver and Bonds/Notes remain weak – dropping to new multi-year lows after rebounding into early-Aug ’22 – the midpoint of the ~4-year high-high cycle that timed the July/Aug ’20 peak and the latest phase of a ~12-month high-high-high-(high) Cycle Progression.
The next similar multi-month peak is likely in 1Q ’23 – the next phase of a 17 – 18 month low-low-high-high-(high; Jan/Feb ‘23) Cycle Progression and a ~5-month high-high-(high) Cycle Progression.
If it stretches into early-Feb ‘23, that high would also arrive at the midpoint of the 12-month cycle that just timed the early-Aug ‘22 peak. An intervening high could be seen near the midpoint of that ~6-month high-high cycle – in early-Nov ‘22.
There are critical factors that could help influence price action leading into the next multi-month peak:
— During the rebound into early-Aug, Bonds & Notes reached upside targets at 145 – 150/US & 122-00 – 124-00/TY, fulfilling the price and timing targets for a new (lower) multi-month peak and reversal lower.
— They also generated 4-Shadow Signals, projecting a subsequent drop to new lows followed by a higher-magnitude advance. (That drop to new lows has since been fulfilled but a new advance has not yet taken hold.)
— By dropping to new lows, Bonds & Notes have fulfilled the criteria for a 5-wave decline (from 2020) with the early-Aug ’22 highs representing wave ‘4’. (Eurodollars fulfilled the criteria for a ‘5th of 5th of 5th’ wave decline from the 2020 peak.)
Combining all three of these factors, Bonds & Notes could steadily make their way back toward the early-Aug ’22 highs, leading into ~Feb ’23, IF a multi-month low takes hold at/near current levels.
Longer-term investors and hedgers could have liquidated long positions in Bonds & Notes in 3Q ‘20 and sold intermediate rallies in 3Q/4Q ‘20 and added to short positions in Aug ‘21, in sync with trading strategies described in INSIIDE Track.
3 – 6 month traders could have covered a portion of these short positions in June and could now cover another portion of those shorts at this time.” TRADING INVOLVES SUBSTANTIAL RISK!
Bonds & Notes (as well as stocks) have fulfilled the criteria for completion of multi-year, 5-wave declines and are now poised for multi-month (a-b-c) reactive rallies that should last into Jan/Feb ‘23. This is also the time (cycles) for decisive, 3 – 6 month lows. Inflation cycles should ultimately push interest rates higher into March/April ‘23… but these sell-offs are at the time (Oct ’22) and price for a pivotal low in Bonds… at the same time stocks are showing completion of a full Elliott Wave downtrend.
2021/2022 was expected to usher in a dramatic shift in multi-decade cycles – timing everything from now-validated War Cycles (late-2021 into late-2025), European Unification Cycles (2022 – 2025), Drought Cycles that peak in 2021/22 and shift to Deluge Cycles in 2022/23, Agriculture Cycles that time 80-Year shifts (beginning in 2022/23), Currency Wars (2021)… and Interest Rates.
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.