Stock Market Peak & 4-Shadow; Early-Jan. Should Trigger Sharper Sell-off.
12/20/21 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 (though several retested those lows today, fulfilling daily trend patterns and projections). 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. Until that occurs, they remain capable of rallying back to their Nov ’21 highs.
The Nasdaq 100, Russell 2000, DJTA and S+P Midcap 400 briefly spiked below their Dec 3 lows today – fulfilling their respective daily trend patterns and setting the stage for a divergent low…
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 may have just 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 low at this time would also fulfill what was described in early-Dec. – describing daily cycle lows in the DJIA (and some other indexes) on Dec. 17 – 24:
12-08-21 – “Since March 20/23, ’20, the DJIA has set a multi-week or multi-month low every 3 months – with the latest three coming on March 23, June 18 & Sept 20/21, ’21. If that pattern repeats, a low could be seen (at least in that index) on Dec. 17 – 24…
The Russell 2000, pictured on page 1, is also encountering pivotal resistance. It has rebounded to the midpoint of its 375-point trading range (2085 – 2460/QR, with a midpoint near 2272/QRH) as it nears a convergence of other intermediate resistance levels around 2280/QRH… If the Russell 2K fails to close above 2280/QRH in the coming days, it could see another sell-off down to range support near 2085/QRH.”
Stocks remain mixed, declining after daily trend patterns projected a short-term peak and reversal lower on Dec 13/14… and a retest of recent lows in indexes like the NQ-100, Russell 2000 & S+P Midcap 400 (that were unable to turn their daily trends up during the early-Dec rallies). That has now been fulfilled.
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. Today’s low tested 2100, which generated an initial rebound. That, too, corroborates the potential for a low around Dec 20. The Russell would need to now rally and close above 2225 in order to signal that an intermediate low is intact.
The overall equity market is still expected to 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.”
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.