Stock Market Cycle Highs & 4-Shadow; Early-Jan. Ushers in Danger Period.
12/22/21 Weekly Re-Lay Alert – “As explained last week, the Dollar is set for a sizeable correction after peaking in line with ‘bullish’ Fed news. However, with all bullish news on the table, what is there left to drive the Dollar higher? That is when profit-taking usually sets in.
In contrast, currencies, precious metals and stocks – on an intermediate basis – were under pressure leading into that same Fed meeting. As soon as the expected news was out of the way, they had little more to weigh on them in the short term. As a result, a rebound quickly ensued…
Stock Indices are rallying sharply after fulfilling intermediate analysis for a second (divergent) low around Dec 20. In doing so, they repeated an intra-month pattern (a ~30-day/~30-degree cycle) that has occurred in a majority of the months since May ’21.
In that scenario, a multi-week top is set in the early days of the month and then a sell-off occurs – creating an intra-month low around the 20th of that month. In this case (like some of the others), it could lead to a rally into the early part of the ensuing month (January)…
That pattern led to pivotal lows on May 19, June 18/21, July 19, Aug. 19, Sept 20 and was expected to trigger another low on Dec 20. That is also a ~3-month/~90-degree cycle between the lows on June 18/21, Sept 20 and Dec 20 – a scenario that was described in early-Dec. – citing related daily cycle lows in the DJIA and other indexes at this time. That was just fulfilled on Dec 20, perpetuating that ~30 AND ~90-degree cycle.
It also fulfilled daily trend patterns and is poised to validate weekly trend patterns in several indexes. Some indexes also fulfilled key (downside) price objectives…
In the case of the Russell 2000, its early-Nov & early-Dec peaks (~2460 & ~2280) produced an intermediate HHL objective at ~2100, very near its range-trading support at ~2085. The Dec 20 low tested 2100 and fulfilled that HHL target, generating an initial rebound that was/is expected to quickly reach ~2280…
On a slightly broader perspective, equities remain in the midst of consolidation with most below their Nov ’21 highs and at or above their early-Dec lows. Weekly trend patterns remain mostly constructive – leaving open the potential for a subsequent rally into Jan ‘22.
Indexes like the Nasdaq-100, Russell 2000 & S+P Midcap 400 have neutralized their weekly uptrends multiple times but would not turn them down until weekly closes below 15,545/NQH, 2136/QRH & 2664/IDX…
The overall equity market is still expected to rally into and set a more significant peak in 1Q ’22, most likely in Jan/Feb ’22… with an important distinction (or possible distinction) to be kept in mind:
Daily and some weekly cycles peak in early-Jan ’22 while monthly and quarterly cycles peak in 1Q ’22 (more synergistic in Jan/Feb ’22). These diverse cycles could combine and time a single peak.
They could also, just as easily, time a pair of separate peaks – an initial one in early-Jan ’22 and a subsequent one possibly in Feb ’22. Price action – particularly in early-Jan. – will be the key. For now, the impending weekly closing levels are the key to adding corroboration to the outlook into Jan ’22.
The daily 21 MACs are poised to turn up in the next 1 – 2 days (due to current price levels and the declining, inversely-correlated 21 MARCs). A few indexes have already closed above their daily 21 High MACs, showing renewed bullishness. The daily trends could reinforce that in the coming day(s).”
Stocks are adhering to intermediate cycles and poised for a bounce into early-Jan ’22 before a new sell-off becomes very likely. The NQ-100, Russell 2000 & DJTA reached multi-month upside targets in Nov ’21 and signaled a wave ‘5’ peak on various levels. At the very least, that projects subsequent ‘A-B-C’ declines with the ‘A’ legs recently unfolding and the ‘B’ waves projected to peak in early-Jan. ’22.
That would usher in the more dynamic (and often more devastating) ‘C’ wave declines in the early days of 2022, following an early-Jan ’22 divergent peak. Price action is beginning to corroborate that. Continued divergence is expected as the equity markets prepare for what could be a dramatic shift in 2022.
Why Does early-Jan ’22 usher in such a dangerous period for stocks? What does this mean for ‘C’ wave decline after early-Jan ’22 cycle high??
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.