Stock Market Peak; Early-Jan. (Divergent) Peak Should Trigger Sharper Sell-off.
12/17/21 INSIIDE Track Update – “Stock indexes are in the midst of consolidation with most of them remaining below their Nov ’21 highs and at or above their early-Dec lows. Weekly trend patterns remain mildly constructive in most indexes – 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 S+P 500 is currently in the strongest position, having spiked to new all-time highs before pulling back. At the same time, the Nasdaq 100 is pulling back to range-trading support near 15,600/NQH. It was not able to turn its daily trend up, so a retest of the Dec 3 low (15,545/NQH) is more likely.
Many of these indexes are repeating an intra-month pattern 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. That pattern led to pivotal lows on May 19, June 18/21, July 19, Aug. 19, Sept 20 and could trigger an imminent low.
Stocks remain mixed with daily trend patterns projecting a short-term peak and reversal lower on Dec 13/14. During the preceding rallies, the NQ-100, Russell 2000 & S+P Midcap 400 were unable to turn their daily trends up – projecting retests of their early-Dec lows following that Dec 13/14 reversal.
This contrast – daily trends failing to turn up and weekly trends failing to turn down – is a classic sign of congestion that could continue into late-Dec. The daily trends should be the first to confirm or negate that possibility.
The overall equity market is still expected to set a more significant peak in 1Q ’22, most likely in Jan/Feb ’22.
There is an important distinction, with respect to impending cycles, that should 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 will be the key.”
Stocks fulfilled projections for sharp sell-offs in Nov/Dec ’21 and are poised for a bounce into early-Jan ’22 before a new sell-off. 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, this 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. 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.