Stock Market (Early-Jan ’22) Top; Danger Period Begins!
01/05/22 INSIIDE Track – “Stock Indices have rallied into early-Jan ‘22 – the fulfillment of multiple daily & weekly cycles that portend an early-year peak. It still remains to be seen if that will also be the projected 1Q ’22 peak OR if a higher peak could still be seen later in January or in February. In either case, an initial top has been forecast for the opening day(s) of 2022 and some indexes may have fulfilled that.
It is helpful to step back and review a few longer-term factors that continue to focus on 2022 as the time when a major peak could be seen in equities. Some have just been described in the Opening Comments.
Longer-term cycles peak in 2022 with the greatest synergy of related monthly cycles coming into play in 4Q ‘22. (That does not, however, remove the potential for at least one sharp sell-off in between a 1Q ‘22 peak and a 4Q ‘22 peak. In fact, that is the more likely scenario for the coming months.)
Price action is another corroborating factor. A couple key indexes – the DJTA and Russell 2000 – fulfilled upside wave (price) objectives in Nov. ‘21, indicating that those highs could hold for several months (if not longer) from that point forward.
That is one of many reasons why the expected 1Q ‘22 peak has repeatedly been described as a likely divergent one with some stocks/indexes setting higher highs while others set equal or lower highs.
The Russell 2K fulfilled that wave objective and a host of decisive upside targets while peaking right at 2460/QR – its multi-year upside range-trading target. That trading range was set by the early-2020 peak near 1710 and the ensuing March ’20 low near 960 (as well as the preceding Jan/Feb ‘16 low near 960) – projecting a surge to 2460/QR after the Russell 2K broke above 1710 in Nov ’20 (960 low – 1710 high – 960 low – 1710 – 2460/QR peak; see accompanying diagram).
By spiking to new intra-year highs (fulfilling its weekly trend and monthly trend patterns) AND fulfilling its Elliott Wave objective AND attaining this multi-year upside target, the Russell 2000 ushered in the time for a sharper decline in Nov ’21… and potentially longer after completing its wave structure.
That 2460/QR objective had been reinforced by the Mar ’21 low (~2085/QR) – precisely at the midpoint of that overall projected trading range (1710 – 2460), a key level that supported declines in May, July & Aug ’21. For the majority of 2021, that support (2085/QR) held multiple pullbacks while creating a corresponding (upside) trading range target at the same 2460/QR level (1710 – 2085 – 2460/QR).
Those ~375.0/QR & ~750/QR ranges have enveloped most of the intermediate and larger-degree swings in the Russell 2000 since the 2009 bottom. They also prompted a sharp sell-off into mid-Dec that had the Russell 2K coming within a few points of that 2085/QR support. That level is now also ‘4th wave of lesser degree’ support (the low before this culminating rally) – magnifying its significance.
That identifies it as pivotal support for this current period AND the breakdown point if an even larger-magnitude sell-off is in the cards (which would be signaled by a weekly close below 2085/QR).
In the same month the Russell 2000 was fulfilling that synergy of upside targets, the NQ-100 peaked right at its multi-month upside target (~16,700/NQ) and reversed lower – with key support near 15,700/NQZ. Late-Nov action projected another sell-off in early-Dec. (see Dec ‘21 INSIIDE Track), which unfolded and spurred a drop to that support that overlaps several other points of support near 15,600/NQH.
That is pivotal support leading into 2022. It is also range-trading support – a key dividing point in an ongoing series of ~1,200/NQ trading ranges with extremes set near 9,600/NQ (Feb ‘20 high), 10,800/NQ (Sept ‘20 low), 12,000/NQ (Aug – Oct ‘20 highs & Mar ‘21 low), 13,200/NQ (May ‘21 low), 14,400/NQ (Oct ‘21 low), 15,600/NQ (Aug/Sept ‘21 highs & Nov/Dec ’21 lows) and 16,800/NQ (Nov/Dec ’21 highs).
A weekly close below 15,600/NQH would likely spur a quick drop to 14,400/NQH…
Another (leading) index also fulfilled major upside objectives in Nov ‘21 – related to a potential wave ‘5’ surge and culmination. The DJTA bottomed in late-Sept and projected a new impulse wave higher (’5’) after experiencing its longest correction since 4Q ‘18 (all linked by the 16-Month Cycle).
On Oct 15, the DJTA closed back above its weekly 21 High MAC and reinforced those bullish signals – spurring a surge into Nov. 2 when the Transports led the way as they fulfilled upside objectives and signaled a multi-week/multi-month peak.
Many significant stocks and indexes fulfilled 1 – 2 year upside targets in Nov ’21 – ushering in a potential topping process that was expected to stretch into 1Q ‘22 (when stronger indexes could set final highs as other indexes diverge.
1Q ‘22 (most synergistic in Jan/Feb ‘22 and ideally in Jan ‘22) is the convergence of a web of 16, 8 & 4-month cycles AND the latest phase of the most consistent cycle of this century – the 3.25-Year Cycle.
That cycle was last involved in creating the Dec. ’18 low and projecting an overall advance into 1Q ’22 – when the next phase should invert and time a peak. That would fulfill a 3.25-year low (1Q ‘09) – low (2Q ‘12) – low (3Q ‘15) – low (4Q ‘18) – high (1Q 2022) Cycle Progression. [There is a chance it could also time a low if a sharp drop into March ‘22 unfolds.]
A peak in Jan/Feb ‘22 would also align with the 2-Year Cycle that was detailed extensively in 2018 and again in 2020. Both times, it created peaks in Jan/Feb of those respective years – as well as subsequent peaks in Sept/Oct ‘18 & ‘20 – and is on track to create a similar peak in Jan/Feb ‘22. (It is also possible it creates a subsequent low in March ‘22 – 2 years from the March ‘20 bottom.)
All of those peaks and cycle highs also increase the likelihood for a subsequent peak in ~Oct ‘22 – the next phase of the 16-Month Cycle.
3 – 6 month & 6 – 12 month (and even 1 – 2 year) traders and investors should have been lightening up on long positions in early-Sept.”
Stocks are adhering to intermediate cycles and the outlook for a decisive peak in early-Jan ’22 followed by a new (and larger, based on the Nov/Dec ’21 4-Shadow Signals) decline to follow. The DJTA just fulfilled a potential peak, perpetuating multiple cycles with a peak on the second trading day of Jan ’22.
That could usher in the more dynamic (and often more devastating) ‘C’ wave declines in the coming weeks, following an early-Jan ’22 divergent peak. This action is initially corroborating the outlook for a dramatic shift in 2022.
The NQ-100, Russell 2000 & DJTA reached multi-month upside targets in Nov ’21 and signaled a wave ‘5’ peak on various levels – signaling that those highs could hold for many months (or longer). At the very least, that projects subsequent ‘A-B-C’ declines with the ‘A’ legs recently unfolding and the ‘B’ waves now peaking in early-Jan. ’22. The ‘C’ waves are now poised to begin.
Why Does early-Jan ’22 usher in such a dangerous period for stocks? What does this mean for impending ‘C’ wave declines in a majority of stocks & indexes??
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.