Stocks Completing ~40-Year Advance II
02/27/15 INSIIDE Track: “Stock Indices fulfilled multi-year expectations and projections for an overall advance into 4Q 2014. The stock market rally into 4Q 2014 fulfilled a 40-year inflationary advance in Stock Indices originating from the 4Q 1974 bottom. As observed previously, the Indices are duplicating what was seen between the early-1930’s and early-1970’s – a similar 40-Year advance…
From the Great Depression DJIA low of 1932, Stock Indices rallied for 40 years into 1972 (with an intervening, 35+% decline 5–6 years prior to that ultimate peak). That rally carried over into Jan. 1973 – making it a total of 40 years & 6 months – and led to a 50% drop unfolding over the ensuing 2-year period.
From the Stock-flation DJIA low of 1974, Stock Indices rallied for 40 years into 2014 (with an intervening, 35–50% decline 5–6 years before the present) and have carried over into 2015. Could a similar 2-year/50% drop unfold once a top is signaled?
If so, it would also be similar to 2007–2009 when the Indices dropped ~50% in less than 2 years. It would also be similar to 2000–2002 when the DJIA dropped almost 40% while the Nasdaq 100 – the Index that led most of the preceding, 10-year bull market – lost over 80%… in a little more than 2 years.
In line with what I have described before, my guess (and this is only a guess, based on technical & non-technical factors) is that the next decline will look more like the 2000–2002 decline – during which the DJIA experienced multiple 1-2 month rallies & 1-2 month declines, from Jan. ‘00–Jly. ‘01, before the events of 9/11 exacerbated the bursting of the Dot-com Bubble and confirmed a larger-degree decline.
Up until 3Q 2001, the DJIA repeatedly rallied to multi-month highs & looked like it was going to mount a new advance… only to turn back down, on a dime. It would then drop to multi-month lows & look like it was going to enter a larger decline… only to abruptly turn back up. That pattern continued for ~18 months even as the bear market was steadily but subtly taking hold. Only then, did the ‘other shoe’ drop.
As for the coming months, the outlook has been that the Indices could see their next intermediate high in early-March… the DJIA testing & holding 1-2 month support on Feb. 2nd, triggered a new rally. Based on those same weekly trend signals, the Indices needed to set new highs to fulfill that pattern.
And that has finally brought the DJIA up to its multi-year, extreme upside target range – discussed throughout the past year – at 18,150–18,550.
The key cycle to monitor remains the second half of April 2015. In addition to monthly & yearly cycles (and the 40-Year Cycle of War & Peace), that time frame is the next phase of multiple weekly cycles as well…In either case, it is still viewed as the culminating phase of a 40-Year Cycle of inflationary advances in Stock Indices.
3-6 month & 6-12 month equity investors should continue to lighten up on long positions as the Indices enter a period when a major decline could begin to take hold.”