Stocks Bracing for Late-Feb. Sell-off; Diverse Indicators Project Plunge into Feb. 26 – 28!
02/12/20 INSIIDE Track Stock Index Update: “They are reinforcing the potential for a divergent top of a slightly higher magnitude (3 – 5 week instead of 3 – 5 day) with the majority of the remaining indexes likely to wait until after mid-Feb. to suffer new declines.
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.
Those intra-month uptrends usher in the potential for an Intra-Month Inverted V pattern in February (initial low at start of month, peak at mid-month, and new lows at end of month).
Recent action continues to fulfill and validate 2-Year Cycle projections. Late-Jan./early-Feb. ‘20 was expected to be a close parallel to Jan./Feb. 2018 – when stocks suffered a quick, sharp ~2-week drop in late-Jan. and bottomed in the opening days of Feb. ’18…
In 2018, the lagging indexes & stocks condensed their decline to a 2-week/14-day drop in late-Jan. – bottoming and reversing higher in the Feb. 3 – 12 time frame.
In 2020, the lagging indexes & stocks condensed their decline to a 2-week/14-day drop in late-Jan. – bottoming and reversing higher in the Feb. 3 – 12 time frame.
In 2018, the indexes subsequently rallied for 2 – 3 weeks before setting intermediate highs.
In 2020, the indexes have rallied for almost 2 weeks, with some (those that turned their intra-month trends up last week) on track for add’l upside into Feb. 13 – 17.
A host of stocks, including a majority of DJIA components, also experienced sharp declines in the second half of Jan. ’20 and then bottoming in early-Feb.
AAPL dropped about 8% in less than a week, bottoming precisely on Feb. 3.
GOOGL lost about 5%, dropping from Jan. 22 into Feb. 4. CSCO lost 7%.
SBUX dropped over 10% in a 2-week period in late-Jan. – turning back up – along with the 2-Year Cycle – on Feb. 3. Others were a bit more extreme…
3M (MMM; a DJIA component) plunged about 15% from mid-Jan. into Feb. 3.
Other DJIA components – like XOM & CVX – began their declines earlier but still plunged into early-Feb. and reinforced the 2-Year Cycle (losing 16% & 14%, respectively).
TRV lost 8%, NKE dropped 9% while PFE plunged over 10% in 4 days. UNH had a 2-week/10+% drop from late-Jan. into Feb. 3… all mirroring what has consistently occurred with the 2-Year Cycle.
DOW was even more extreme, plunging about 15% in 2 weeks and bottoming on Feb. 3. So, many of the DJIA components fulfilled the 2-Year Cycle outlook.
The Russell 2000 lost over 6% in late-Jan., turning back up on Feb. 3. Most of the primary indexes dropped about 4% before turning back up on Feb. 3.
Leading the pack (to the downside), the Transports dropped over 7% after fulfilling analysis for an intermediate peak and reversal lower on Jan. 20 – 24 – the latest phase of an 11 – 12 Week high-high-high-high-low-low-low-low-high-(high) Cycle Progression.
All these stocks and indexes fulfilled the latest expectation linked to the 2-Year Cycle… turning focus forward to one of the next phases of it. One of the intriguing aspects of the 2-Year Cycle and what unfolded in 2018 has to do with the month of April.
In 2018, the DJIA and some other stocks and indexes underwent another sell-off in March, ultimately bottoming (while spiking below their early-Feb. lows) in early-April. Their lowest weekly closes were in late-March ’18.
Leading into the first half of 2020, focus has been on late-Jan. – for a quick, sharp sell-off, early-Feb. – for a bottom and reversal higher, and April – when an overlapping 8-month & 16-month cycle recurs.
Will 2020 continue to perpetuate the 2-Year Cycle?
And where does that leave the indexes in the short-term?
They turned their intra-month trends up last week, extending the more likely time for an intermediate peak to mid-month (Feb. 13/14 or 17)…
The recent action is also reinforcing other indicators (see 2/05/20 Weekly Re-Lay Alert) – projecting rallies to new highs in some indexes, others to equal highs (double tops) and some to lower highs – before a new sell-off.
The Transports are an example of the contrasting pattern in which a rally to a lower high is seen. They have just rebounded to their descending daily 21 High MAC while attacking weekly resistance (11,037 – 11, 086/DJTA) after reaching and holding the daily LHR on Feb. 11.
With the inversely-correlated daily 21 MARC set to surge the next four days, these factors all argue for a secondary top and the onset of a new decline.
Here again, the Transports could lead the other indexes – even if only by a day or two. (Since Nov., the DJTA has had four rallies that lasted longer than a week. The first three each lasted 9 or 10 trading days. The current one just completed 8 trading days of rallying.)
The DJTA is still targeted for a second decline into Feb. 26 – 28 (180 degrees/6 months from their Aug. 27/28 low and the culmination of multiple daily high-high-low and low-low-low Cycle Progressions). That would perpetuate the 12 – 14 week low-low-low-low Cycle Progression that timed the early-Dec. low.
Its initial decline lasted 14 days (Jan. 17 – 31). If the second decline matches that (‘c = a’ wave structure) and begins on Feb. 12 – 14, it would project a drop into Feb. 26 – 28. So, a reversal lower should take hold in the next 1 – 2 days. Based on the ongoing divergence, the DJTA could drop to new lows as other indexes bottom at higher lows (in late-Feb.). That would also reinforce the focus on April 2020.”
Stocks are bracing for sharper sell-off in late-Feb. (beginning after Feb. 17). An ominous 4-Shadow Signal concurs and warns that a much larger drop is on the horizon as DJTA weekly cycles and sell signals project plunge into Feb. 26 – 28.
What Would Late-Feb. Plunge Signal for March/April 2020?
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.