Stock Topping Phase & 4-Shadow Signal; Early-Jan. ‘22 = Next Danger Period.
12/06/21 INSIIDE Track Update – “Stock indexes are fulfilling the 1 – 2 month outlook for peaks in early-Nov and subsequent lows in late-Nov/early-Dec. That should lead to a culminating rally into 1Q ’22 (ideally Jan ’22) – when the NQ-100 and potentially the S+P 500 could set higher highs while many other stocks and indexes would likely set lower highs. Weekly trend patterns are validating that scenario with the DJIA signaling a top is likely intact.
Many of the recent sell-offs exceeded the magnitude of previous corrections (at least the most recent 2 – 3 declines) and triggered 4-Shadow Signals on various magnitudes. When that occurs, it foreshadows a more significant sell-off in the future – after an intervening bounce.
That dovetails with ongoing expectations for a divergent peak in 1Q ’22 (ideally Jan ’22) – when some stocks/indexes could still set new highs while the majority set equal or lower highs. A determining factor will be whether/which stocks bottom above or below their previous (Sept/Oct ’21) lows in Dec.
Already, the DJTA & Russell 2000 fulfilled the ideal upside targets for a wave ‘5’ peak (the ultimate peak of the overall advances from March ’20 lows) – both with great precision. That portends lower highs for those stocks/indices in 1Q ’22, before a second sell-off. Now, the DJIA has triggered a decisive signal that likely bodes the same thing for that index. It turned its weekly trend down on the Dec 3 close.
To reiterate, that signal creates a pair of key expectations.
First, it elevates the current correction to a higher magnitude and projects another (future) sell-off after an intervening bounce (‘b’ wave).
Second, it often times – ideally within a week – the low or culmination of that initial decline.
So, the likely result is a low on Dec 3/6 – when cycles already projected an intermediate bottom – and a rally to an equal or lower high in the coming weeks.
The action of the past few weeks corroborates the intermediate cycle outlook for sharp sell-offs into early-Dec – described in late-Oct and late-Nov (Nov ’21 & Dec ’21 INSIIDE Tracks). The S+P 500 and Nasdaq-100 are reinforcing that timing… but from a slightly different perspective. Both have neutralized their weekly uptrends but cannot turn them down until Dec 10 (close below 4485/ESH) or Dec 17 (NQH; trigger point not yet known).
Combined with the fact the NQ-100 just reached its initial downside target and ‘c = a’ objective while retracing 50% of the Oct 4 – Nov 22 rally, those weekly trend patterns could trigger intermediate lows at any time. Both are rebounding but remain below their descending daily 21 Low MACs… so they are not ‘out of the woods’ yet.”
Stocks fulfilled projections for sharp sell-offs in Nov ’21, potentially stretching into the first half of Dec ‘21. The NQ-100 reached multi-month upside targets surrounding 16,700/NQ and signaled a wave ‘5’ peak that projected a subsequent sell-off into Dec ’21 and down to ~15,600/NQ.
In early-Nov, the Russell 2000 fulfilled its monthly & weekly trend patterns as well as Elliott Wave structure – all of which projected a final surge following the Sept 20 cycle low. It reached pivotal upside targets near 2460/QR, projecting a subsequent (larger-magnitude) sell-off toward 2085/QR and ultimately lower.
The DJTA was similar – reaching multiple major upside price targets in early-Nov and setting the stage for a multi-month (or longer) peak. Continued divergence is expected as the equity markets prepare for what could be a dramatic shift in 2022, beginning with a decisive and divergent peak in early-Jan ‘22.
What are ramifications of DJTA, Russell 2000 and NQ-100 attacking multi-month or multi-year upside targets? What does this mean for sell-off after early-Jan ’22 cycle high??
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.