What to Make of Energy/Equity Sell-offs; Will ‘2nd Shoe’ Eventually Drop?
What to Make of Energy/Equity Sell-offs; Will ‘2nd Shoe’ Eventually Drop?
10/24/18 Weekly Re-Lay Alert – Dollar, Equity & Energy Markets Fulfilling Objectives: “The Dollar is fulfilling daily, weekly & monthly upside objectives (cycles, waves & price indicators)… As is often the case, that culminating move – stretching to an extreme – is coinciding with capitulation moves in other markets, like stocks and oil markets.
Even though that might not represent a direct cause-and-effect, technical traders are mainly concerned with the fact it is happening… regardless of the rationale. It is conceivable, though, that these extreme moves could have correlative impacts that might not have otherwise occurred (unintended consequences).
For instance, if the sell-off in equities and energy markets (combined with some recent economic data like home sales) begins to temper investors’ enthusiasm on the US economy – even if that is just a minor downward revision of those expectations – that could have a negative impact on the Dollar, helping to usher in the peak that cycles and other timing tools are anticipating.
On a related front, the second sell-off in equity markets – validating last week’s NQ secondary peak and now fulfilling expectations for the weekly 21 MACs to turn down while setting the stage for the weekly trends to also provide a confirming signal – was/is expected to spur a ‘flight-to-quality’ rally in Bonds & Notes that could stretch into Nov…
Stock Indices are fulfilling the overriding potential – reinforced by the action of the weekly 21 MACs – for this correction to be on par with similar corrections in Jan./Feb. 2018, Dec. ‘15/Jan. ’16 & July/Aug. 2015… In the case of the DJIA, those corrections ranged from 2500 – 3300 points, each representing about 12.5 – 16% declines, and could be repeated now.
With respect to the 2-Year Cycle, similar Sept./Oct. corrections were seen in 2008, 2010, 2014 & 2016 and lasted 3 – 6 weeks. In 2011 & 2013, intervening corrections were seen during the same period and each lasted about 3 weeks.
Since the DJIA’s Oct. 3 peak, immediately after fulfilling its weekly trend pattern and spiking to new intra-year highs, this decline has lasted 3 weeks. Since that is the minimum duration of the 2-Year Cycle declines, more downside is still likely. And, these indexes still need to turn their weekly trends down in order to confirm a larger-magnitude peak.
All three have neutralized their weekly uptrends at least two times. They need weekly closes below 24,899/DJIA, 2745/ESZ & 6907/NQZ to turn those weekly trends down. The earliest that can occur is Oct. 26. If it were to transpire, that would usher in the more likely time (the following 1 – 2 weeks) for a reactive bounce even while projecting a future leg down.
For the current week, the extreme downside targets (weekly HLS levels) come into play at 23,913/DJIA (lines up with 3 – 6 month support at 23,997/DJIA), 2590/ESZ & 6650/NQZ. If those levels are tested and hold on the Oct. 26 close (even if they spike significantly below them on Oct. 25 or 26), it would reinforce the potential for an imminent low and rebound…
Crude Oil, Unleaded Gas & Heating Oil extended their declines following Crude’s test and holding of its primary upside target for 2018 (that stretched up to 77.30/CL). Its early-Oct. peak perpetuated a 32 – 34 week low-low-low-(high) Cycle Progression and ushered in the time for a quick, sharp correction.
The weekly trend pattern would allow for Crude to extend this decline into [reserved for subscribers]”
Energy & Equity markets confirming multi-month cycle highs (Crude cycles peaked in/around Sept. 2018 coinciding with Middle East cycles shifting in late-Sept. ’18). Natural Gas remains bullish and is projected to see a larger overall advance into mid-to-late-Dec. ’18. (Equity markets poised for multi-week bottom in late-Oct.)
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.