Stock Market Plunge into Late-March ’20 on Track; 40-Year Cycle Turning More Bearish!
02/27/20 INSIIDE Track Stock Index Update: “Stock Indexes continue to plunge into the end of February, fulfilling:
— The 4-Shadow Signal (that projected a final rally to divergent highs into Feb. 17 followed by a larger sell-off in the weeks that followed);
— An Intra-Month Inverted V, (that projected an intra-month peak on Feb. 13 – 17 followed by a plunge to new lows into month-end);
— The 40-Year Cycle (that projected a rally into Feb. 12/13 followed by a sharp drop into late-Feb. and potentially into late-March);
— And DJTA weekly cycles (that projected a drop from late-Jan. into late-Feb./early-March).
The 40-Year Cycle continues to be one of the most intriguing aspects of this overall outlook and was described throughout February. To put it into perspective:
On Feb. 12/13, 1980, the DJIA peaked and stocks dropped 8 – 10% into late-Feb. (as part of an overall ~20% decline into late-March ‘80).
On Feb. 12/13, 2020, the DJIA peaked and stocks dropped 8 – 10% (or more) into late-Feb. – a near perfect repeat of the 40-Year Cycle.
It doesn’t get much closer than that!
…Of course, the monthly & weekly charts continue to show that the Transports are in a much larger transitioning phase in which they remain below their Sept. ’18 highs and have been setting a secondary peak in sync with the monthly 21 MAC and 21 MARC indicators.
The other interesting aspect of the current time – and the link to 4Q ’18 – is what was discussed in early-Feb., warning of an impending plunge in stock prices. It involves the similarity of Feb. ’20 to Sept. ’18 with regard to FAANG stocks.
As warned earlier this month, the S+P 500 and Nasdaq 100 were beginning to look at lot like late-Sept./early-Oct. ’18 when the FAANG stocks were almost singlehandedly keeping the indexes moving higher even as dozens, or hundreds, of other stocks had already peeled off and reversed lower – signaling intermediate declines. That promptly led to a ~5,000 point plunge in the DJIA.
From mid-Jan. – mid-Feb. ‘20, that pattern was again emerging as many stocks peaked weeks or months before the S+P 500 and Nasdaq 100. It warned of similar consequences:
2-07-20 – “Stock Indexes are passing through a Perfect Storm of critical cycles and indicators… setting the stage for a divergent peak and larger-magnitude (3 – 5 week instead of 3 – 5 day) correction…
…this reinforces a similar situation that arose in 3Q ’18 when the FAANG stocks plus MSFT accounted for a dramatically-disproportionate percentage of the overall market’s gains. Recent weeks/months have seen a return of that pattern. If those stocks merely returned to an average percentage of gains for their industry, even though they would still be showing strong gains year-over-year, it could have a significantly negative impact on the overall market – similar to 4Q ‘18.)…
The DJTA continues to be the weakest index and appears to be leading a new reversal with this past week’s action… so the majority of any sell-off could wait until after mid-Feb. All of the indexes fulfilled the initial potential – for a sharp sell-off in late-Jan. (based on the 2-Year Cycle) – but subsequent action is ushering in the potential for a new, and potentially larger, sell-off to follow.”
2-08-20 – “The DJIA, DJCA & S+P 500 retested their highs, creating the potential for double tops. Meanwhile, the DJTA, Russell 2K (2000 stocks) and NYA (2000 stocks) rebounded to lower highs – reinforcing the monthly & weekly cycle peaks of late-Jan…
The FAANG stocks plus MSFT are again driving a dramatically-disproportionate percentage of the overall market’s gains. If they merely returned to an average percentage of gains for their industry, it could have a significant impact on the overall market – similar to what occurred in 4Q ‘18.…”
2-12-20 – “The S+P 500 and Nasdaq 100 (buoyed by FAANG stocks and a few other disproportionately bullish stocks) are rallying to new highs on the heels of turning their intra-month trends up. That signal projects advances into mid-month and up to monthly resistance.
Most have already reached monthly resistance, some while turning their intra-month trends up on Feb. 6 – so the timing aspect of that signal (a rally into Feb. 13 – 17) is the only remaining factor. That is another factor arguing for the majority of any second sell-off to wait until after mid-month…
The 4-Shadow signal discussed last week remains in place and projected this latest rally – spurring some indexes to new highs, some to equal highs (double tops) and some to lower highs – followed by a sharper sell-off. That is what is unfolding with the primary indexes, spurred by a few key stocks, surging to new highs even as so many others remain below their Jan. highs… It is still likely to usher in a significant top… the Transports could lead the other indexes…”
Those FAANG stocks were the final stocks to summit (as in the rollercoaster analogy in which the entire train of ‘cars’ cannot accelerate lower until the final car passes the peak) as all these other indicators and cycles were confirming bearish signals after mid-Feb. That has already led to a ~4,000 point plunge in the DJIA, reinforcing this similarity to 4Q ’18.
All the while, the Transports are also fulfilling the 1 – 2 month outlook and the potential for a much larger sell-off… These indexes are poised to turn their intra-year trends down, which would have a longer-reaching impact on the overall equity market. The March ’20 INSIIDE Track will expound on this topic. For now, these bearish signals and cycles are still unfolding and must be respected…”
Stocks plunging in lockstep with 2-Year Cycle & over-arching 40-Year Cycles as well as weekly Cycle Progression in Transports & Industrials & ominous 4-Shadow Signal triggered in late-Jan/early-Feb. Perfect Storm of sell signals – triggered on Feb. 7 – 14 – signals ‘significant top’, ‘start of a much larger process’, ‘majority of sell-off to follow’, significantly negative impact on overall market’, leading to ‘intra-year trends down, which would have a longer-reaching impact on the overall equity market’. These damaging signals reinforce the 40-Year Cycle and 2-Year Cycle outlook for another plunge into late-March 2020.
What Would March ’20 Stock Market Plunge Mean for 2020 – 2022?
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.