Stock Market: Russell 2K Holding Major (6 – 12 Month) Downside Target at 1710/QR.
05/25/22 Weekly Re-Lay Alert – “Stock indices are slowly generating signs of an intermediate low after plunging from cycle highs on April 19 – 21 and subsequently fulfilling multiple downside targets in May.
Equities have again created a divergent bottom (May 12 & May 20 lows) with the Russell 2000, S+P Midcap 400 and some others remaining above their May 12 lows while the DJIA, S+P 500 & NQ-100 spiked below their May 12 lows (but most have not closed below those May 12 lows). The May 20 lows were also a precise repeat/fulfillment of the intra-month pattern that has occurred in a majority of the past 13 months…
In most of the 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, rebounded, and then repeated the final part of that pattern – selling off into the 20th of the month. They need to close above the May 17/18 highs to signal a bottom.
While this has not yet occurred, there are other signs of a multi-week bottom forming. The first, which has been an ongoing focus, was/were the levels where many key indexes reached and bottomed…
During the month of May, the Russell 2000 has been the primary focal point – from a technical/cyclical perspective – and has been 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 – and convergence of multiple 6 – 12 month support levels – 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 – the ideal objective for May ’22 – and was highlighted in the Weekly Re-Lay & INSIIDE Track.)
At 1710/QR, the Russell 2K 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. 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’.
It was like the ‘Perfect Storm’ of targets and support levels converging at 1710/QR.
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.
Both of those indexes are adding a little corroboration to the potential for a multi-week bottom. The DJIA just turned its daily trend up (S+P 500 needs a daily close above 3998/ESM to do the same) while closing above the declining daily 21 Low MAC.
The Russell 2000 also closed above its descending daily 21 Low MAC but would not turn its daily trend up until a daily close above 1841.6/QRM. These are only ‘baby steps’ in the journey towards forming a bottom but they are noteworthy.
Looking out over the next ~week, the monthly close should be a revealing factor. After twice neutralizing their monthly uptrends, it would take monthly closes (on the May 31, ’22 close or any monthly close after that) below 32,283/DJIA, 4116/SPX (cash index) & 12,825/ NQX (cash index) to turn the monthly trends down. That would then project the Sept/Oct ’22 cycle high to be a lower high in most stocks and indexes.
If, conversely, those monthly trends do NOT turn down, higher highs would be possible – at least in some indexes – in 2022.”
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.