China Cycles Corroborate Crash Cycles

12/16/15 Weekly Re-Lay Alert:   ““Another Exercise in ‘Connecting the Dots’”

— Dot #1 – For over a decade, my analysis has focused on 2013–2017 to usher in a Major transition in the US Dollar – particularly its role in global finance.  This was projected to accompany a strong Dollar rally in 2013–2016, disguising what was going on behind the scenes & beneath the surface… and then be followed by a potential Dollar Crisis.

— Dot #2 – The 40-Year Cycle has provided the strongest clues & corroboration to that analysis – linking dramatic decisions, events & agreements that impact the US Dollar and/or global currency (& Gold). 

That 40-Year Cycle pinpoints 2016 as the watershed year (40 years from the Jamaica Accord of 1976… and a sequence of 40-Year Cycles from related events in the ‘6’ years of the applicable decades, dating back to 1776).  Leading into 2016 is one cycle.  Leading out of it is the start of a whole new one.

— Dot #3 – Intermediate Dollar cycles & indicators projected a strong advance from May 2014 into early-2015 and then another advance from 3Q 2015 into 2016… with the likelihood of the Dollar’s rally extending into Nov. 2016 – before a Major top becomes most likely (although technical events & price action in 1Q 2016 need to be watched closely).

— Dot #4 – One of the primary conclusions has been that 2016/2017 would time the increasing realization that a global basket of currencies is likely to diminish (whether or not it completely replaces) the Dollar’s role as global reserve currency.  The IMF XDR (also known as SDR) has been one of the key alternatives.  And that could ultimately morph/evolve into some form of digital currency.

— Dot #5 – Leading the charge for that transition, China has been pegged as the ultimate driving force.  Its role in BOTH the Asian Infrastructure Investment

Bank (AIIB) AND the BRICS’ New Development Banks confirmed this conjecture and triggered the onset of this process, in 2014.

— Dot #6 – Corroborating Dot #5, China has a myriad of multi-year & multi-decade cycles entering a crescendo in 2016/2017 – that have timed a ~200-year rise to global economic power.

— Dot #7 – The IMF has just announced that the Chinese Yuan will join the SDR in Oct. 2016.

My… what a coincidence!!  And with such perfect cyclic adherence!!!

While all of those dots provide the outline for current & future Dollar expectations, there are some related dots that should also be considered…

— Dot #8 – In order for the IMF to consider the Yuan, China had to adjust its currency approach – allowing for more market-forces influence to govern the Yuan’s trading. That very adjustment contributed to the August 2015 sharp drop in the Yuan & Shanghai Composite Index, as well as corresponding sharp moves in global equities. 

— Dot #9 – Initial considerations seem to point to a weakening Yuan in the near-term, which could create a classic ‘sell the news, buy the fact’ leading into – and then out of – 4Q 2016.

— Dot #10 – Here’s the real intriguing one…  There is one presidential candidate – and one political ‘dynasty’ (if ~20 years can be considered a dynasty) – that has been intimately connected with and implicated in PRC influence-peddling & scandals since the early-1990’s.

In each case, the implications were that of the Red Chinese influencing important decisions & political events in the US… via that same political entity. As of right now, that political entity is favored to win the election… in Nov. 2016.  Hmmm.

While I hesitate to take Dot #10 any farther – and strongly resist most political discussions or debates – I also do not ignore potential cyclic fulfillments.  The problem with opening that ‘Pandora’s Box’ is that it immediately triggers some extreme, conspiracy-minded accusations & innuendo that I would rather avoid.  So, just file that one away for future reference.

As I have described this overall scenario in the past, it is like a giant jigsaw puzzle with the edges and part of the center already assembled.  The big question is how some of the specific factors & players will ultimately look. Each time a new piece – or group of pieces – is put into place, some new information or details is usually revealed.

But, that is waaaayyy in the future (from a futures trader’s perspective), so let’s return to the present…

Stock Indices remain in the time frame when another multi-month top has been expected.  That period was ushered in by the 14–15 Week Cycle that has governed the SP 500 – and converged on Nov. 30–Dec. 11^th – and reached its greatest synergy when joined by the overlap of the 32–33 Week Cycle on Dec. 7–18^th. 

That 32–33 Week Cycle is the one that helped time the Sept. 2014 peak and pinpointed the late-April/early-May 2015 high.  That is also the cycle that has prompted the repeated emphasis that the real trouble (NOT the 15-20% drop that was expected right after the late-April/early-May cycle high) would wait until after mid-December 2015. 

More than anything, it distinguishes that a bearish multi-month period is about to be entered.  Similar to May–August 2015, it could be a steadily developing string of declines that increase in intensity as a new downtrend evolves.

The DJ Transports remain the bearish leader and did spike below their late-Aug. bottom – extending their overall drop to almost 13 months (from their late-Nov. 2014 peak) while setting the stage for an initial low on Dec. 11^th/14^th and a quick, sharp bounce into Dec. 15–17^th. 

That was corroborated by the weekly HLS indicator & by the DJTA nearing its monthly HLS on Dec. 11^th.  As explained on Dec. 9^th:

Dec. 11–13^th repeated the 25–27 calendar-day cycle while Dec. 14^th repeated the 19 trading-day cycle.  The Transports spiked lower on Dec. 14^th and quickly entered their expected rebound.

That also adhered to the Dec. 12^th analysis that the daily trend patterns were auguring a quick spike down… followed by the normal 1–3 day rebound.  With all the primary Indices also testing respective monthly support ranges, the die was cast.

This rebound should be short-lived as the Indices are now passing mid-December AND have multiple indicators slowly rolling over to the downside.  A short-term low-high-(high) Cycle Progression in the NQH projects a minor high for Dec. 17^th or 18^th. 

Since that coincides with the DJ Transports intermediate cycle and the other Indices 32–33 Week Cycles – it provides the optimum synergy of related cycles that portend an important peak.

And then there is that daily trend pattern…  The DJIA, ESH & NQH have each neutralized their daily downtrends once.  That means the Dec. 18^th close is the earliest they could reverse their daily trends back up.  However, as is often the case, that also pinpoints Dec. 17^th or 18^th as the likely time for a secondary top.

So, many signs are pointing to the same conclusion… for a more significant peak in the next 1–2 days.  Tomorrow’s action should help specify where that peak is most likely… and could also set up a new 1–4 week sell signal…

3–6 month & 6–12 month traders/investors should have re-entered the short side of the Indices (except NQ) on Oct. 29/30–Nov. 6^th and should…”   TRADING INVOLVES SUBSTANTIAL RISK.

China Cycles (link to 17YC Sept. 29, 2014 II Post) Converge with Stock Market Crash Cycles & usher in period of ‘real trouble’ beginning now.  Stock Indices are fulfilling the mid-December ‘Transition Period’ and analysis detailed in the Oct. 2014 Stock-flation & May 2015Stock-flation II Reports.

Little has changed for the overall outlook during the past 12 months.  All along, the expectation has been that the ‘real trouble’ will begin immediately after mid-Dec. 2015.  With China Cycles entering their most tumultuous period (2016–2017) and the Shanghai Composite entering a 2nd bearish period (now until Feb. 2016), the ramifications could be dramatic, so hold on tight!  Traders & investors should have been selling at the early-Nov. highs and should be preparing for a 2016 sell-off! TRADING INVOLVES SUBSTANTIAL RISK.