NFLX = First of FAANGs to Fall; Reinforce Analysis for 3Q ’18 Top & 4Q ’18 Drop
NFLX = First of FAANGs to Fall; Reinforce Analysis for 3Q ’18 Top & 4Q ’18 Drop
07/25/18 Weekly Re-Lay Alert: The last few weeks have provided some watershed movement in normally-prescient markets. Those are the markets normally associated with an ability to anticipate what is to come in the economy and/or in monetary policy in the months/quarters that follow.
As discussed in the July 24, 2018 The Bridge, Copper has plummeted after twice testing its 1 – 2 year upside target (~3.3000/HG). Copper is often seen as one of the early indicators of economic or inflationary trends. When it bottomed in early-2016, that presaged an economic upturn.
When it subsequently peaked in late-2017 and then set a double-top in May 2018, Copper signaled the culmination of the latest phase of an inflationary uptrend and ushered in the time for a correction. That, along with similar crashes in many grain markets and a sharp drop in other metals, deflated some of the immediate inflationary pressures.
In response, Bonds & Notes have rebounded as upward pressure on interest rates waned.
Crude, in contrast, has not yet completed its up cycle so it has been bucking this corrective trend, forging higher – on balance – into forecast cycle highs… it could be in for a similar deflating shortly after that.
Of course, many of those deflating markets are also nearing support and providing indication that those corrections are culminating. If so, it could be time for the start of a new upswing in price inflation.
Since substantial damage has been done to the previous uptrends – in markets like Copper, Gold & Silver, Soybeans & Corn, Coffee & Sugar and even Lumber – a bottom does not necessarily coincide with an accelerated move up.
Instead, those markets are likely to go through a new bottoming phase and steadily build a foundation from which a 2019 surge higher becomes more likely. And that would fit perfectly with cycles described for Soybeans, Gold, Bonds and even Stock Indices – with the greatest concentration and collision of cycles surrounding 3Q 2019.
In the meantime, other markets have not done as much damage to their previous uptrends and were/are poised to enter new up phases that could head to new 2018 highs in the foreseeable future…
In the midst of these deflationary forces, equity markets have swung both ways with the Dow Indices and S+P 500 remaining in the same trading range since late-Jan. – early-Feb.
Stock Indices remain divergent with the Nasdaq 100 remaining strong and in an all-out uptrend – even as it has just fulfilled multiple intermediate upside targets – as the DJIA is struggling to make it back to its June high. It would take a weekly close above 25,402/DJIA to turn the 3 – 6 month trend positive in the DJIA. The same continues to hold true for dozens of stocks with respect to their June 2018 peaks…
I continue to watch NFLX as a potential ‘canary in the coal mine’ – a harbinger of developing bad news… It dropped precipitously after that warning was published (July 14) and has traded below 380 ever since. A close below 340 would be a more convincing signal.”
Stocks are steadily tracing out a topping process in 2018, expected to roll over in 3Q 2018 and then turn negative in 4Q 2018. That is expected to be the beginning of a process that ultimately focuses on 3Q 2019. NFLX – one of the primary drivers of this year’s advance – is showing the first signs of trouble. It fulfilled major upside objectives and signaling a likely 3 – 6 month (or longer) peak in late-June. Look for other ‘proxy stocks’ to show similar signs of topping in the coming month(s).
Once a top is signaled, equity indexes are projected to drop to 22,100/DJIA (2280 – 2325/SPX & 5575 – 5750/NQ) – the primary downside target for 2018. Equities are expected to set major peaks in 3Q 2018 and then secondary (lower) peaks in late-Nov./early-Dec. – after which they should enter a more bearish phase.
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.