S+P Midcap, DJTA & Russell 2000 Validating Multi-Month Cycle Peak; Portend December Sell-off.
11/29/24 – “Outlook 2025 – The Three ‘Cs’ of Trading
Some revealing market relationships are maturing so it is a good time to review important principles about analyzing and/or trading seemingly related markets. The recognition and adherence to one critical principle is vital to long-term trading success.
Coincidence, Correlation or Causality?
In early-October, two coinciding analyses – in two often-correlated markets – were repeatedly described in the Weekly Re-Lay with the focus on new buy signals that were projecting strong rallies into November 2024. Those two markets were Stock Indices – with the focus on the S+P Midcap 400 and to a lesser extent, the Russell 2000 – and Bitcoin.
The obvious question was: ‘What Does This Mean?’.
Context for 3 ‘C’s
The two markets often move hand-in-hand. However, ‘coincidence does not mean causality’. More likely, it is a case of an overriding factor(s) influencing multiple markets similarly. They do, however, provide a corroborating interplay…
The Oct 3, 2024 issue of The Bridge (a Weekly Re-Lay publication) elaborated on July/August 2024 cycle lows in Bitcoin and explained how new buy signals were projecting a surge into Nov. 2024 (as part of a broader advance into 2025).
Days later, the Oct 9, 2024 issue of the Weekly Re-Lay (and repeated issues that followed during October & November) described the ’coinciding’ outlook for the S+P Midcap 400 – and related small and midcap stocks & indexes – to undergo two successive rallies. (See insets.)
The first rally was forecast to unfold in October and – after a quick sell-off into early-Nov. cycle lows – the second was forecast to take place in November, lasting through most of the month and potentially peaking in late-November.
[November 22 & 25th were highlighted as the two days with the greatest synergy of daily, weekly & monthly cycle highs converging. However, with cycles of this magnitude – many of them being weekly or monthly cycles – there is a broader range of time when a multi-month peak could take hold.]
Combining the ‘C’s
On Oct 16, 2024, the Weekly Re-Lay brought these analyses together with an Alert titled: “Crypto Correlation: Coincidence or Causality?”. In there, the outlook for two coinciding rallies was reiterated, concluding the following:
10-16-24 – The October 3, 2024 issue of The Bridge focused on Currency War cycles and the potential for Bitcoin to see an October surge…. stock indexes were projecting a similar October surge with small and mid-cap indexes expected to lead the way… Whether that is coincidence or causality – or a little of both – matters little. It is always important to analyze each market on its own merits and technicals and to avoid the temptation to trade one market off the outlook for another.”
— October 16, 2024 Weekly Re-Lay Alert
The two can, and sometimes do, move in lockstep with one another but the magnitudes and timing of those corresponding moves often diverge due to a myriad of other factors that exert a stronger influence on the markets being observed.
And that brings this discussion to the ‘Axiom of Market Correlation’ reprinted on page 6. Each market should be assessed on its own merits.
8’s & 80’s: Cycles of Conflict
Another pair of ’C’s – Cycles of Conflict – are focused on 2025 as a potentially volatile time. One is the culmination of the 80-Year Cycle of War that helped pinpoint the Russia/Ukraine & Hamas/Israel conflicts. 2025 is 80 years from 1945… and all that occurred during that momentous year. It is also 160 years from 1865 (culmination of Civil War).
The other is the 8-Year Cycle of American Attacks (physical & cyber) that recurs in 2025. That has been discussed over the past ~15 years and has also timed major cyber attacks that entered escalated phases in 2009 & 2017. Stay tuned…” TRADING INVOLVES SUBSTANTIAL RISK
Stock Indexes fulfilled the October/November outlook and rallied into November 25th when the S+P Midcap & Russell 2000 likely set decisive peaks as they attacked & held major upside range-trading targets near 3400/IDX & 2460/QR. The DJTA is similar (~17,600 target). (S+P 500 & NQ-100 are distinct and have slightly higher targets.) The 17-Year Cycle also remains focused on 4Q 2024 as the most likely time for a major peak in equities.
In early-October, the S+P Midcap 400 was projected to lead an overall surge into late-November ’24 – when a more significant peak is a much higher probability. The greatest synergy of those cycles – reiterated many times in our publications – was on November 22/25th and represented the ideal time for the small and midcap indexes to set pivotal peaks and usher in a sharp (initial) 3 – 4-week drop.
Stocks Positive into October 17th/18th, Then Late-November; S+P 400 to Lead Way Higher
Cycles and timing indicators are already identifying a pair of likely time frames when the sharpest sell-offs are more likely… and when future lows are expected. The first one arrives in December ‘24!
Why are S+P Midcap, DJTA & Russell 2000 Projecting Declines After November 25, 2024?
How is Russell 2000 Range Target Signaling Déjà vu to November 2021?
How are Major Range Targets in DJTA, IDX AND RUT Validating a Top?
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.