Late-Aug. Poised for Multi-Week Equity Top; Watch AMZN & MSFT.
Late-Aug. Poised for Multi-Week Equity Top; Watch AMZN & MSFT.
08/22/18 Weekly Re-Lay Alert – The Energy/Equity Connection: Since May 2015, Crude Oil and the overall equity markets have moved in similar trends. This does NOT mean that every rally and decline were in lockstep with each other. And it does not suggest that every multi-month or multi-quarter or multi-year top in one was a corresponding extreme in the other. However, the general trends and cycles have coincided.
Both markets experienced significant drops into Aug. 24, 2015 and then suffered subsequent drops that bottomed in Jan./Feb. 2016. Both have rallied since then.
From early-2016, both Crude and the DJIA rallied for 3 – 4 months and then corrected for 2 months.
Both moved progressively higher into late-Jan. 2018, with the strongest rallies unfolding in July ’17 – Jan. ’18.
Both dropped sharply into early-Feb. ‘18 and have moved higher since then.
Both set intervening highs in late-May – early-June ‘18 but have since exceeded those highs.
Both, on a short-term basis, pulled back into Aug. 15/16 and then projected rallies back to their highs.
To reiterate, the intervening moves were often very different. And, the intervening swings were not in lockstep with each other. However, a cursory glance at both charts reveals a correction from May ’15 into Jan. ’16 and an unfolding uptrend since then.
The point?
The reason for addressing this has more to do with oil than with equities (although there is obviously overlap, particularly in an index like the S+P 500).
The 2017/2018 outlook for energy markets was to see a strong rally into Jan. 2018 and then subsequent highs in May ’18 and late-Aug. ’18 (the governing 15 – 16 Week & 31 – 32 Week Cycle Progressions would allow that peak to stretch into early-Sept. ‘18).
Energy markets fulfilled most of that, surging into late-Jan. 2018 and then setting subsequent peaks in the second half of May ’18. Most recently, Crude was forecast to correct into Aug. 13 – 17 – the latest phase of a ~4-week high-low-low-low Cycle Progression – before resuming that advance.
That, too, is now underway…On a multi-year basis, Crude maintains its most critical and decisive resistance at 75.00 – 77.30/CL – a range that includes the yearly lows of 2011 & 2012 (support turned into resistance)…
Stock Indices are showing renewed divergence with the NQ-100 lagging after peaking in line with daily cycles on Aug. 8 – 9 (and in sync with the attainment of extreme upside targets – weekly LHRs – in AMZN & MSFT).
After that initial high, the DJIA fell right to its intra-week objective and extreme downside target at 24,944 – 24,977/DJIA while the S+P hit related support at 2806.5 – 2811/ESU. While hitting 24,965/DJIA and 2803.0/ESU, those indexes generated daily trend buy signals and projected rallies to new recent highs.
They have since fulfilled that but maintain the potential for some additional upside with the S+P focused on decisive resistance – and the weekly extreme upside target (LHR) at 2879 – 2888/ESU. The NQ-100 has a secondary web of daily cycles on Aug. 24/27 – when another 1 – 2 week high is likely.
That is coinciding with the latest phase of a 10-week low – low – low – low – high – low – high – (high) Cycle Sequence projecting a DJIA peak for Aug. 21 – 28. With the S+P 500 (cash) retesting its all-time high AND poised to surpass the longest bull market in history (by some accounts), there are intriguing signs of a potential top on the near-term horizon.”
Stocks are reinforcing expectations for a topping process in 3Q 2018 followed by an initial decline in 4Q 2018. The Indexes are poised to set 2 – 4 week peaks in late-August, just as the S+P 500 is generating a sign of an extremely mature bull market. The DJIA still needs to exceed its late-Jan. high if it is to fulfill its weekly trend pattern in the same way the NQ-100 and S+P 500 have now done.
By year-end, the DJIA is projected to drop to 22,100/DJIA – its primary downside target for 2018. Look for precarious period in 4Q 2018, particularly after/if (lower) peaks are set in late-Nov./early-Dec.
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.