Stock Indexes Drop into Nov 3 & Set Support; Surge into early-Dec/~34,400/DJIA Still Projected.
11/04/22 INSIIDE Track Update – “Stock Indexes rallied into mid-week and then/now entered the expected pullback after the DJIA fulfilled the potential for at least a 15% gain from its Oct 13, post-CPI spike low. The daily & intra-month trends have identified critical support (Nov 3 lows), which should not be broken if a new rally is going to take hold in the coming week.
This (initial?) rally took the indexes higher into early-Nov ’22 – fulfilling the initial outlook from the Oct 13 & Oct 20 signals and bringing them to a pivotal juncture when they should determine if further upside is likely. The DJIA’s rally into Nov 2 also fulfilled its Oct 14 weekly 2 Close Reversal buy signal – that projected 2 – 3 weeks of subsequent upside as the first surge. Most other indexes corroborated that, also projecting surges into the opening days of Nov ’22.
This also comes after the DJIA neutralized its weekly downtrend for the second time on Oct 28 – pinpointing the past week as a pivotal time when an initial (or final) peak could take hold. In order to turn that weekly trend positive, and project additional upside that could ultimately stretch into early-Dec, it would need to give a weekly close above 32,889/DJIA.
The recent surge has fulfilled the minimum expected from an intriguing ~12-Year Mid-Term Election Cycle. There is a reinforcing ~24-Year Cycle (1974 – 1998 – 2022) that helped hone expectations for this rally…
1962 – ~12% gain // 1974 – ~20% gain (from Oct ’74 low; before dropping back to low in Dec ‘74)
1986 – ~11% gain // 1998 – ~20% gain
2010 – 8 – 10% gain // 2022 – 15 – 20% gain??
2022 is the latest of these with strong rallies projected for Oct/Nov ’22. As stated previously, a ~15% gain would take the DJIA back to ~32,950. It spiked up to 33,071/DJIA and fulfilled that target before retreating.
A ~20% gain – also seen in 1998 & 1974 (though the Oct/Nov 1974 rally – after advancing 20% from the Oct ’74 low – headed back to its lows in Dec ‘74) – would take the DJIA back to ~34,400/DJIA… right where the synergy of more bullish upside targets converge.
For now, the key is the intra-month trend pattern (which is likely to dovetail with the daily trend patterns). If they fail to close below the Nov 1 – 3 lows, it would show resilience and project a rally back to recent highs – and likely higher – leading into mid or late-Nov.
Looking ahead, there are some key factors that are reinforcing the outlook for a rally back to the mid-Aug ’22 highs in 4Q ‘22. The S+P 500 recently corroborated that potential with the action of its initial advance…
Often, an initial advance will travel 50% of the ultimate, overall magnitude of an entire advance. If a market is going to ultimately rally 100 points, it will often rally 50 points during its first advance… before correcting.
Regardless of how long it takes to break above that initial peak (as long as it does not close below the originating low in the interim), that market will ultimately target an overall 100-point advance once it closes above the initial high. That is at the core of range-trading targets. It is at the core of the LHR/HLS indicator (although that indicator includes a time factor).
In the case of the S+P 500, it already has its upside target – [reserved for subscribers]…
As is always the case, this scenario is NOT based on a single indicator or cycle. This pattern is NOT going to govern a market all the time.
Instead, it is the synergy of multiple indicators, wave objectives & extremes, trend patterns and cycles that are increasing the potential for this scenario to unfold IN THIS SITUATION. As stressed in late-Sept, the mid-Aug highs were/are expected to hold greater significance than other previous turning points.
As stated in the Oct ’22 INSIIDE Track:
9-30-22 – “It is important to reiterate the significance of those mid-Aug peaks since they set the stage for the drops to new 2022 lows that have now been seen.
At that time, the DJIA surged right to its ~34,200/DJIA objective – the final multi-month upside target for its mid-June & mid-July ’22 buy signals – likely setting its expected 3Q ’22 peak without being able to turn its weekly trend up (that price action was the key factor)…
Simultaneously, the S+P Midcap 400 also peaked in mid-Aug ’22 – within days of a ~21-week low-high-low-high-high-high-(high) Cycle Sequence while fulfilling an over-arching 41 – 43-week low-low-low-high-(high) Cycle Progression and completing a full .618 rebound of its Nov ’21 – June ’22 decline… without turning its weekly trend up. That projected a drop to new lows.
Reinforcing those indexes, the DJTA topped in mid-Aug ‘22 in perfect sync with a 20-week high-high-(high) Cycle Progression while completing successive advances of 33 days each (wave equality).
Not only were those successive rebounds equal in duration, they were equal in magnitude – with both rebounding ~2,600/DJTA points. It was a textbook ‘wave ‘4’ bounce equals wave ‘2’ bounce’ that set the stage for a wave ‘5’ decline to new intra-year lows (now being fulfilled).
Most other indexes failed to turn their weekly trends up during that rally (into mid-Aug ‘22), signaling subsequent drops back to their mid-June lows. That has now been fulfilled… ushering in a pivotal period…
All of the indexes dropped into the latest phase of a 14 – 15-week high-low-low-(low; Sept 21 – 30) Cycle Progression – one of the two most consistent NQ-100 & DJIA weekly cycles over the past ~15 years.
The latest decline is allowing the S+P 500 to finally attack 3 – 6 month support at 3560 – 3610/SPX while the NQ-100 re-tests a myriad of downside targets and 3 – 6 month support levels at 10,700 – 11,100/NQ (2022 HLS, multi-year range-trading support, 50% retracement of Dec ’18 – Nov ’21 advance, test of the Sept/Oct ’20 lows). That could create a bottom…
Wave ‘5’ Lows Imminent?
For multiple reasons, a low at this time – and near current levels – could usher in a longer-lasting consolidation phase before the next decline. That is reinforced by the overall wave structure in most indexes – that are now fulfilling a type of wave ‘5’ declines…
That means that a subsequent ‘a-b-c’ rebound (a rally that is one degree higher in magnitude than the mid-June – mid-Aug ’22 rallies) could unfold and ultimately take many indexes back to their mid-Aug ’22 highs – levels that represent the wave ‘4’ rebound peak on the way down. They are now viewed as the ‘4th wave of lesser degree’ resistance and/or upside targets ONCE a low has been confirmed.”
So far, that is exactly what stocks have done.
They bottomed at or near the late-Sept lows and did it while briefly spiking below the mid-June lows – fulfilling the criteria for a wave ‘5’ decline AND potential bottom.
In order to reinforce this scenario, on a near-term basis, stock indexes needed to fulfill a pair of patterns in the opening days of November.
They needed to pull back during the first three trading days of the new month BUT NOT close below that range (on any day after Nov 3).
And, they needed to twice neutralize their daily uptrends BUT NOT turn those trends down.
They sold off into Nov 3 and twice neutralized their daily uptrends in the process.
As long as these indexes do not close below their Nov 3 lows (31,727/DJIA, 3704/ESZ, 10,708/NQZ, 12,894/DJTA, 1758/QRZ, & 2326/IDX), they will NOT turn their daily trends down and they will NOT turn their new intra-month trends down.
The DJIA remains the strongest market – and could even exceed its mid-Aug high while the Nasdaq-100 remains the weakest market and could fail to reach its mid-Aug high.
So, those levels are now decisive support for the 1 – 2 week and 2 – 4 week trends. As long as they hold, stock indexes need to rally and close above their Nov 1 – 3 highs in order to turn the intra-month trends up and project additional upside.
1 – 2 month traders could have entered long positions in stock indexes on Oct 20 and [reserved for subscribers]” TRADING INVOLVES SUBSTANTIAL RISK!
Stock indexes are holding late-Sept/early-Oct lows and projecting the largest advance in 2022 – capable of reaching 34,200 – 34,600/DJIA (see Oct ’22 INSIIDE Track for details) by/in early-Dec ‘22. They recently fulfilled 9 – 12 month downside wave structures and project a higher-magnitude rally in 4Q ‘22. Many other cycles & indicators concur. Oct 13 & 20 buy signals corroborate!
How Would Late-Sept ’22 Low Reinforce Overall 2022/2023 Outlook?
Why is Higher-Magnitude Rally Very Likely in 4Q ‘22??
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.