Stock Market: Russell 2K Attacks/Holds Major (6 – 12 Month) Target at 1710/QR.
05/21/22 Weekly Re-Lay – “Stock indices have fulfilled multiple downside targets after plunging from cycle highs on April 19 – 21. They have initially created a divergent bottom (May 12 & May 20 lows) after most indexes matched the duration of their three previous, successive declines while attacking multi-month downside range targets…
Stock Indices are creating the kind of divergent low, on a 1 – 2 week basis, that was described earlier this week. Friday’s late-day rebound helped to reinforce this possibility but much more validation is needed. The Russell 2000 is the current benchmark index – from a technical/cyclical perspective – being closely monitored for signs of a low.
That is a result of this index dropping from its projected wave ‘5’ peak (in Nov ’21) to the primary downside range-trading target at 1710/QR. Ever since it peaked near 2460/QR in Nov ’21, the 6 – 12-month downside range target has been at 1710/QR… which was finally reached on May 12 as multiple timing indicators reached fruition. (In late-April, 1710/QRM also became the 2 – 4 week downside range target.)
At that point, the Russell 2K fulfilled that pair of downside range-trading targets while completing a 50% retracement of the entire 2020/2021 advance. That also has this index retesting the level of BOTH the late-2018 and early-2020 peaks – the two most significant tops prior to 2022.
That is a decisive level of resistance-turned-into-support AND the ideal level near which a 1 – 2 month (minimum) bottom should take hold. It was also the intermediate downside wave objective where the latest decline (late-March – May 12) would equal the prior (Jan/Feb ’22) decline – a textbook ‘c = a’.
The DJIA & S+P 500, similar to the Russell, also attacked the levels where their latest declines equal the magnitude of their Jan/Feb ’22 declines.
Stock Indexes initially sold off to monthly support into May 12 – the downside targets for the intra-month trends and the time when the latest decline matched the duration of three previous declines (15 – 16 trading days). That led to an initial rebound with most indexes failing to signal a low… and setting the stage for a divergent low around May 20 – potentially repeating a recurring pattern.
In a majority of months since May ’21, stocks have set multi-week peaks in the opening days of each month and then seen 1 – 2 week declines. In many of those instances, subsequent lows were set around the 19/20th of the month (May 19, June 18, July 19, Aug 19, Sept 20 & Dec 20, ‘21).
In May ’22, they repeated the first part of that pattern – bouncing into May 3 and setting an intra-month top. They sold off and are now poised to repeat the final part of that pattern – setting a low around the 20th of the month. They need to close above the May 17/18 highs to signal a bottom.”
The Russell 2000 has attacked its 6 – 12 month & 3 – 6 month downside target at ~1710/QR – a decisive objective that has been discussed since the Russell 2K reached its major, upside (5th wave) objective at 2460/QR in Nov ’21 and signaled a 6 – 12 month (or longer) peak. Now that it has fulfilled that analysis and decisive downside target, the Russell could begin to lead a bottoming process in equities. On an intermediate basis, the next peak is expected in late-May/early-June ’22.
On a broader basis, stocks remain in a major topping process – fulfilling the outlook for a decisive peak in early-Jan ’22 followed by a multi-month plunge to begin 2022. That is just the start of a massive shift projected for 2022 – ultimately leading to market jolts in late-2022 through late-2023. An overall 4 – 5 month decline was/is expected between that Jan ’22 cycle peak and the next (Sept/Oct ’22) cycle peak.
What Does Russell 2K Action Portend for Other Indexes?
Will Another Sell-off Follow Late-May/early-June ’22 Cycle Peak??
How Does This Impact 10, 20 & 40-Year Stock Cycles Colliding in 2022?
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.