Bonds Portend Secondary Peak in July ’22; Stocks Resume Sell-offs.
Outlook 2022/2023 – A New Cycle Begins
04-28-22 – It is often impossible to identify the start of something until after that something has begun to evolve… and that something has been definitively identified as a ‘something’.
The start of most wars is not identified until after the participants – or sometimes the historians – know that it actually was the start of a war. There are many conflicts, but only certain ones expand into a war.
Similarly, most bull markets – and bear markets – are not identified at their onset. It is only after a market has moved far enough away from an extreme to confirm it is in a bull or bear market.
One of the reasons I prefer to use other indicators in place of a technique like Elliott Wave principle is that it takes multiple waves – moving away from an extreme point – to finally confirm that a wave structure has turned and a new impulse wave (the direction of the primary trend) is underway.
Is a sell-off part of an ’a-b-c’ correction before a new rally? Or is that sell-off the wave ‘1’ of wave ‘1’ of wave ‘1’ of a new primary downtrend?
An Elliott Wave Tangent
That is not to criticize Elliott Wave. It still has several strengths and valid applications… as well as a special place in my trading journey since it was my first real exposure to any form of technical analysis. I was introduced to Elliott Wave in 1979/1980 and spent a few years studying and judiciously applying it in the markets… with mixed results.
I even spent a period of time in the early-1990’s devoting 20 – 30 minutes on each Friday morning calling A.J. (‘Jack’) Frost – the co-author of The Elliott Wave Principle – in British Columbia and talking with him (and often his wife Francis), about the markets and whatever else might come to mind.
To this day, I have a collection of handwritten letters (and many of the stamped envelopes) from Jack – as well as copies of the some of the letters I wrote him and notes from our phone conversations – as a memento. I have also had some very gracious interactions with Bob Prechter – as recently as 2016 and as long ago as the late-1980’s. I hold Elliott Wave in a special place in my heart.
I only mention this to place my sparse use of Elliott Wave in context… as well as my strict aversion to debating wave counts in various markets. That topic comes up a lot of times, so it is worth addressing. Like most technical indicators, it has a place and a time. It also has strengths and weaknesses.
One has to do with definitively identifying the start of a new trend… the main theme of this discussion.
Back to the Subject at Hand…
The use of cycles is one approach that helps identify the time to look for the start of ‘something’ (even before it has happened) – whether that be a new trend in the markets, the recurrence of Disease Cycles or War Cycles, a new geopolitical reality, or even the time for the start of a potentially disruptive sunspot cycle or Seismic Swarm Cycle.
Just as one conflict does not signal a war, one earthquake or volcano does not signal a swarm of seismic activity, and one outbreak does not signal the onset of a pandemic – one market sell-off does not signal a major bear market… at least not by itself.
And that is, yet again, where the principle of synergy comes into play. It is the coincidental occurrence of multiple corroborating factors that often takes those seemingly random events – like those just cited – and places them in a different context.
What’s the point?
A New Cycle?
I would never start a discussion like this without an ‘endgame’ in mind. However, since this is intended to be the start of a somewhat larger discussion, it is okay to lay a little groundwork first.
There are a myriad of factors & cycles – many discussed over the past ~decade and some not yet discussed – that argued for 2021/2022 to mark a major cyclic transition, a type of ‘changing of the guard’ or ‘handing the baton’ from one cycle to another.
I intend on reviewing, updating and elaborating on many of these in the coming months. One of those has not received much attention lately – even though it is exhibiting many signs of reaching fruition. That is the cycle of European Unification – discussed throughout the past decade – projected to reach a crescendo in 2018 – 2021 and yield a new reality in the years that follow (2022 – 2025 – ??).
There were many factors and points of evidence to watch for – described in those discussions – including the breakdown in the Euro. The following are just a few, bullet-pointed for current brevity:
— This cycle was expected to coincide with all the related cycles identifying 2016 – 2021 as the culmination of one major 40-Year Cycle and 2022 – 2025 as the initial years of a new 40-Year Cycle. (While the start of something might not have been immediately evident, the timing for it was.)
— The discussion centered around the principle that unity rarely occurs out of normal, run-of-the-mill circumstances and that it would take multiple threats of dis-unity to finally trigger a new unification. (Brexit was a perfect example.) Complacency does not lead to change… but conflict or challenges often do.
— Europe would have to further separate and approach the edge of an economic & diplomatic abyss before any real unity was likely to occur… it wouldn’t just emerge out of a vacuum.
— 2018 – 2021 was identified as the culmination of these European unification and disunification cycles and should usher in a new phase of European Unity in the years that followed.
— The early years of this new Cycle of European Unity would coincide with the emergence of War Cycles in late-2021 – late-2025.
The period of 2016 – 2021 saw three primary factors fulfilling this and setting the stage for a move back toward some new form of unification:
1 – Self-induced disunity (Brexit, multiple referendums, Catalonia/Spain, etc.)
2 – Outward political attacks (mainly from the US during the last administration and even the one prior).
3 – Threat of military attack (beginning Nov ‘21).
The ‘2’ Year
One of the better known cycles is the Decennial Cycle (dating back to late-1930’s and the book ‘Tides and the Affairs of Men’ by Edgar L Smith. Simply put, the Decennial Cycle postulates that similar years of each decade experience similar market action (i.e. certain years are down years, others are up, etc.).
There is certainly some truth to that with one particular facet highlighted in the January ‘22 INSIIDE Track and its discussion of the stock market 40-Year Cycle and 20-Year Cycle – all tied to lows that occurred during the ‘2’ year of respective decades.
The 40-Year Cycle linked lows in 1862, 1902, 1942 and 1982 while the 20-Year Cycle linked lows in 1942, 1962, 1982 and 2002. In both cases, the resulting low-low-low-low Cycle Progression portends an inversion and likely high in 2022.
The discussion on that 40-Year Cycle traced economic events back to 1782 and 1822 – both of which followed multi-year tumultuous periods and ushered in new multi-year and multi-decade cycles.
What about European Unification Cycles and the ‘2’ year?
1992 – Maastricht Treaty, leading to creation and introduction of Euro.
2002 – Introduction of Euro.
2012 – Height (or depth) of Euro Debt Crisis (following related crises in Greece, Iceland, etc.) – leading many to fear an imminent global depression.
2022 – Euro plunging as Europe uniting over threat of common enemy.
The ‘2’ years have timed the ‘start of something’ repeatedly… and it appears 2022 is no different…
Stock Indices fulfilled the latest phase of expectations for 2022 – with the DJIA rallying into April 20 (the precise date on which stocks peaked in 2016 and were forecast to peak in 2022) and then suffering a sharp, late-April sell-off. The charts on page 5 were also included in the April ‘22 INSIIDE Track, detailing why April 20, ’22 should time a peak.
Throughout March & April, late-April had been forecast to see the next ‘abrupt sell-off’ in stocks after DJIA cycles peaked on April 18 – 22 (most synergistic on April 19 – 21 but ideally on April 19/20 along with the Date of Aggression). It was/is the third ’danger period’ of 2022 for stocks (early-Jan – late-Jan, early-Feb – late-Feb & April 20 – late-April).
On an intermediate basis, an anticipated spike high in the DJIA would act as the final car (in the proverbial roller coaster) to go over this summit. Then, all the cars could drop in tandem. The ~15-week low-low-low-high-(high) Cycle Progression projected that DJIA peak to take place during the week of April 18 – 22.
The more precise daily version of that cycle projected a peak on April 20/21, fulfilling the related 106 – 107 day low (9/20) – high (1/04-05) – (high; 4/20-21) Cycle Progression.
The next phase – when a subsequent high would be likely – is in early-Aug ’22. The midpoint could time a corroborating/intervening high around June 13.
The DJIA spiked to new multi-month highs on April 21, as most other indexes diverged and set lower highs, and ushered in this latest danger period as its cycles reversed. The ensuing plunge is fulfilling what was described prior to last month’s issue, not only in the entire stock market but also in Gold & Silver…
As warned then, April 19/20 was expected to time the culmination of an intervening up cycle and usher in an abrupt sell-off in late-April – reinforced by the fact most indexes had already set intermediate peaks in late-March (with their weekly trend patterns projecting drops to new lows). The April 11 Weekly Re-Lay reiterated that…
I reprint these to emphasize the significance of the April 20 DJIA peak and the pivotal role it will play moving forward… also the reinforcement of the uncanny 2-Year Cycle, which was again validated by the April 20 high (highest DJIA daily close in 2022).
In 2016, the previous phase of the 2-Year Cycle that has consistently been cited as the closest analog to 2022, stocks bottomed in February and did not set their next peak until April 19/20, 2016.
From there, they corrected 7 – 10%.
In 2022, the year that has consistently been compared to 2016, stocks bottomed in February and did not set their next peak until April 20/21, 2022.
From there, they have corrected ~7 – 10%.
On a broader basis, little has changed from what has been stressed the past 6 – 12 months…
2022 is the collision of major cycles – some multi-decade and some multi-generational – when a major top was forecast for equity markets. (The Jan ‘22 INSIIDE Track also delved into a corroborating generational cycle that suggested 2022 – 2023 could strongly resemble 1973 – 1974.) The first significant sell-off was projected to begin after monthly and yearly cycles peaked in early-Jan ‘22…
From a price and wave perspective, the Nov, Dec ‘21 & Jan ‘22 issues of INSIIDE Track detailed why and how the DJTA, Russell 2000 and NQ-100 had fulfilled precise upside range-trading targets AND the price objectives needed to fulfill ‘5th of 5th wave’ highs.
That was another reason the early-Jan ‘22 cycle peak was projected to time divergent highs (since those other indexes had already signaled that multi-month/multi-quarter peaks were intact). Range-trading targets in both the NQ-100 and Russell 2000 are back in focus – providing key downside targets [reserved for subscribers]…
Bonds & Notes extended their latest decline into April 11 – 25, fulfilling a 54 – 55-week high (early-Mar ’20) – low (late-Mar ’21) – (low; April 11 – 25, ‘22) Cycle Progression. However, they would show no signs of a 1 – 3 month bottom until weekly closes above 144-16/USM & 121-12/TYM.
The next 3 – 6 month peak is still expected in July ’22, in line with a ~1-year high-high-(high) Cycle Progression and the midpoint of the 4-Year Cycle Progression that helped time the July ’20 peak.
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 can [reserved for subscribers].” TRADING INVOLVES SUBSTANTIAL RISK!
Bonds & Notes remain on track for a convincing decline into ~3Q ’22 (watch Oct ’22 when a 4-year low-low cycle matures)… and ultimately into 1Q ’23. Equity markets are validating analysis for a 1 – 2 year peak in 2022 and a sharp decline beginning in early-Jan ‘22. They are now fulfilling intermediate analysis for the next significant sell-off to take hold in stocks AND precious metals after intervening peaks on April 18 – 22, ’22. ‘Crash Cycles’ also recur in 2022/23 (a ~7-Year Cycle that last timed sell-offs and lows in 2001/02, 2008/09 & 2015/16) and are steadily being validated. Inflation cycles are also poised to keep pressure on Bonds (and consequently stocks) in 2022.
2021/2022 was expected to usher in a dramatic shift in multi-decade cycles (40-Year & 80-Year 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.