Stock Market: Russell 2K Holding ~1710/QR Target/Support; Early-June High Likely.
05/28/22 Weekly Re-Lay – “Stock indices have rallied strongly after reaching multi-month downside targets and setting a pair of divergent lows on May 12 & May 20. That created the ideal setup for a new 1 – 2 month bottom after stocks matched previous declines and adhered to the 2-Year Cycle (portending a low on May 19). Price action is validating this and could lead to an initial high in early-June…
Stock Indices are heading into a decisive time when their recent strength could help them generate a positive signal basis the monthly trend. As explained in recent weeks, May ’22 is the ideal time for a multi-month low – based on that indicator.
After twice neutralizing their monthly uptrends (as of the April 29 close), most stock indexes require monthly closes (on May 31, ’22 or any monthly close after that) below their April lows – most notably 32,283/DJIA, 4116/SPX (cash index) & 12,825/NQX (cash index) to turn the monthly trends down.
The inverse of that is also important and is why a multi-month low was/is so likely in May ’22 – whether or not the monthly trends turn down (since a trend reversal often occurs at the culmination of the initial leg down). If, however, the monthly trends do NOT turn down and equities hold all the pivotal downside targets that were reached in May ’22, [reserved for subscribers]…
Reinforcing this scenario, stocks closely adhered to the 2-Year Cycle AND the recurring intra-month pattern during the month of May ’22. The 2-Year Cycle has been repeatedly illustrated and detailed, most recently portending a 1 – 2 month low in Feb ’22, an intermediate peak (led by DJIA) on April 19 – 21, and a subsequent low around May 19 (May 19 ’16 was previous low, May 20 ’22 was recent low).
However, price action was the primary focus – in particular the outlook for the Russell 2000 to complete its ~6-month sell-off and bottom near 1710/QR, where a myriad of range & wave targets converged with decisive support levels.
At 1710/QR, the Russell also completed a 50% retracement of the entire 2020/2021 advance while retesting the level of BOTH the late-2018 and early-2020 peaks – the two most significant tops prior to 2022.
The Russell 2000 dropped right to that target (6 – 12 month, 2 – 3 month & 2 – 4 week range targets) and bottomed while other indexes (DJIA, SP, etc.) were also reaching textbook wave targets.
Stock Indexes created a bullish divergent bottom in May with the stronger indexes bottoming after dropping right to monthly support into May 12… while the weaker indexes spiked to lower lows on May 20, but held support.
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 – setting lows 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 that entire pattern.
June ’22 could begin with a similar pattern.”
The Russell 2000 has attacked and initially held 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 – with another sell-off possible if an early-June high is set.
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.