Interest Rates Drop Linked to 1Q ’20 ‘Stock Panic’; July ’20 = Bond Cycle Peak
01-31-20 – “Stocks continue to move remarkably similar to how they did in 1978 – 1980, one complete 40-Year Cycle ago. In early-2018, INSIIDE Track began discussing why 2018 – 2022 possessed some uncanny parallels to 1978 – 1982 and why the action of the stock market was expected to unfold in a similar (rhyme, not repeat) manner.
The 40-Year Cycle was NOT the driving reason for that, but was an important factor in the myriad of cycles, technicals and fundamentals… leading to that conclusion.
One particular cycle was discussed throughout 2018 – projecting a major, multi-year low for late-’18 – and next comes back into play in 2022, the same time as a 40-Year Cycle from the 1942 & 1982 lows. That was a 3.25-Year Cycle that has governed stock market action during this entire century…
That 3.25-Year Cycle remains intact and reinforces the 40-Year Cycle. The action of the past two years has also powerfully validated this 40-Year Cycle. 2018 – 2019 has closely (sometimes, amazingly so) followed the roadmap of 1978 – 1979 as recapped in the following 7/31/19 analysis.
It summarized what had taken place up to that point and reiterated expectations for a quick drop into late-Aug. ’19 when a 3 – 6 month (or longer) bottom was likely (while also describing why Nov. ’19 should usher in a serious intensification of tensions between the U.S. and Iran… similar to Nov. 1979). All that reinforced ongoing analysis for a sharp stock sell-off in late-Jan./early-Feb. ‘20:
7-31-19 – “On an overall basis, the period of 2018 – 2022 was forecast to experience at least four corrections of 10 – 20% during this period – just as in 1978 – ‘82 – with powerful rallies surrounding those declines. On a little more precise basis, 2018 traded in very similar action to 1978 – exactly 40 years prior.
In 1978, the DJIA set a 6 – 9 month bottom in February and then rallied into Sept./Oct. ‘78. In early-Oct., equity markets reversed lower and dropped sharply (15 – 20%) into/through Dec. ‘78.
Similarly, 2018 saw a 6 – 9 month bottom set in Feb. followed by a rally into Sept./Oct. ’18 In early-Oct., equity markets reversed lower and dropped sharply (15 – 20%) into/through Dec. ‘18.
In 1979, the DJIA rallied – in three distinct waves – throughout the first quarter, peaking in April ’79 and then selling off for a month.
In 2019, the action was similar (not exact, but similar… history rhymes, it does not repeat).
Following that ~month-long sell-off (1979), the DJIA rallied to new intra-year highs into 3Q ’79 – ultimately retesting the 1 – 2 year peak it set in Sept./Oct. 1978.
In 2019, the DJIA is acting similarly – rallying to new intra-year highs into 3Q ‘19 (after a one-month sell-off) and retesting the peak it set in Sept./Oct. ‘18 as key indicators begin to flash warning signs.
In 1979, the retest of the previous year’s peak resulted in a new 1 – 2 month sell-off that was similar – but not quite as damaging – as the 4Q 1978 decline.
In 2019, expectations are similar – based on a host of other indicators and cycles. Stocks are retesting their previous year’s high (the Sept./Oct. ‘18 peaks) and are expected to see a new 1 – 2 month sell-off – with current cycles and related timing indicators portending a low in Aug./Sept. 2019.”
Fulfilling that June/July analysis, equities did see a sharp sell-off in July/Aug. ’19 and bottomed in late-Aug. ’19. They did set a 3 – 6 month bottom and tensions did dramatically escalate – between Iran and the U.S. – beginning in Nov. 2019… right on (40-Year Cycle) schedule. A US Embassy was attacked in late-2019, just as it was in late-1979.
In 1979 (40 years prior), stocks then rallied into early-1980 – spiking to their highest levels in over two years while setting a multi-month peak in the first six weeks of the new year. The DJIA then suffered its sharpest drop in a couple years – a drop that was complete before the end of 1Q 1980.
In 2019, stocks then rallied into early-2020 -surging to their highest levels in over two years and could set a multi-month peak in first 3 – 6 weeks of the new year… just as they did in 1980.
All of that strengthened the case for a stock market peak on Jan. 20 – 24, ’20 followed by a sharp sell-off in late-Jan./early-Feb. ’20.
However, that 40-Year Cycle analysis is just one factor in an overwhelming amount of factors arguing for this late-Jan. peak and sell-off…
The 8-Month & 16-Month Cycles project multi-month peaks for late-Jan. 2020. A peak at that time would fulfill a 16-month low-low-low-high-(high) Cycle Progression that timed the late-Sept. ’18 peak (and a related 8-month cycle).
The 2-Year Cycle projects a late-Jan. ’20 peak followed by a sharp sell-off into Feb. 2 – 13, 2020.
The 11 – 12 Week Cycle, most prominent in the Transports, projected a multi-week peak for Jan. 20 – 24, ’20…
All of that yearly, monthly & weekly analysis was corroborated by daily price action. The intra-month uptrends projected rallies into (at least) mid-month and up to monthly resistance levels. Those resistance levels coincided with multiple weekly LHRs (extreme upside weekly targets at 29,211 – 29,255/DJIA, 3304 – 3340/ESH & 9080 – 9156/NQH) and upside wave targets (29,292/DJIA) – increasing the potential for a peak & reversal lower in late-Jan.
That was stressed in last month’s issue, concluding: “In 2019/2020, stocks resumed their uptrend after fulfilling late-Aug. ‘19 cycle lows and could extend a final peak into the second half of January ‘20… before experiencing a quick, sharp drop into early-Feb. ‘20.”
Jan. 22 – 24 validated that analysis and triggered a sequence of 1 – 2 week sell signals that are now morphing into 2 – 4 week signals and increasing the likelihood for a sharp drop in late-Jan./early-Feb…
Bonds & Notes have further validated analysis for a multi-month bottom in Nov. ’19 – perpetuating a ~13-month/56 – 60 week high (July ’16) – high (Sept. ’17) – low (Oct. ’18) – low (Nov. ‘19) Cycle Progression.
The early-Nov. low also perpetuated a 17 – 18 week high (Jly. 2 – 6, ‘18) – low (Nov. 5 – 9, ‘18) – low (Mar. 4 – 8, ‘19) – low (Jly. 8 – 12, ‘19) – low (Nov 4 – 18, ’19) Cycle Progression…
The wave structure continues to reinforce this potential. Bonds & Notes completed an ‘a-b-c’ correction from the late-Aug. ’19 peaks – first declining into mid-Sept. (‘a’), then rebounding into early-Oct. (‘b’) and then selling off into early-Nov. (‘c’)… with both declines being of almost exactly equal magnitude (‘c’ = ‘a’)… a textbook correction.
That should usher in a wave ‘5’ advance which is still expected to peak in mid-2020 – ideally in mid-July 2020 – the fulfillment of a textbook, 4-year low-low-low-low-high-high-(high) Cycle Progression that last timed peaks in mid-2012 and mid-2016 and next peaks in mid-’20.
With the latest global scare (Coronavirus) threatening to further slow China’s economy, and potentially impact global growth as a result, Bonds & Notes could be providing important timing clues as to when to expect a shift.”
Bonds & Notes remain focused on mid-2020/July ’20 for a major, multi-year peak (and corresponding bottom in interest rates). They fulfilled analysis for a multi-month low in Nov 2019, and have entered what is perceived to be a final, wave 5 of V advance into a multi-year peak in July ’20.
Longer-term cycles had been projecting a ‘Global-Shaping Event’ (with focus on China… ???) and Stock Market Panic in early-2020 (see March 2019 INSIIDE Track for details)… likely spurring this final drop in interest rates. In sync with numerous cycles, a sharp stock sell-off should be complete before the end of 1Q ’20… how long before that has an impact on interest rates?
2020/2021 represent final, culminating years of 40-Year & 80-Year Cycles (see Nov ’19 INSIIDE Track) – timing everything from War (watch late-2021 into late-2025), Climate (Drought Cycles peak in 2021/22 and transition to Deluge Cycles in 2022/23), Agriculture, Currency Wars… and ultimately Interest Rates!
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.