Stocks Confirming Major Highs in Key Indexes; Add’l Selling Possible in Dec.
12/01/21 Weekly Re-Lay Alert – “Stock Indices are generating sell-offs that, in many cases, exceed the magnitude of previous corrections (at least the most recent 2 – 3 declines) and triggering 4- Shadow Signals on various magnitudes. When that occurs, it foreshadows a more significant sell-off in the future – after an intervening bounce.
The current sell-off is not complete so it is premature to be discussing the next rally. For now, one of the key factors to monitor is whether stocks bottom above or below their previous (Sept/Oct ’21) lows. Original expectations – described in early-Nov when a multiweek sell-off was forecast – anticipated higher lows… That is still what is expected in the S+P 500 & NQ-100 – the indexes most likely to set higher highs in 1Q ’22. However, other indexes – including the DJIA – could spike to lower lows in early-Dec before rebounding, signaling they could set corresponding lower highs in 1Q ’22. And that would perpetuate the same divergence that has been unfolding since May ’21.
Leading indexes, like the DJTA & Russell 2000, already completed what was likely their wave ‘5’ rallies (of an overall 5-wave advance from the March ’20 lows) – peaking precisely at decisive upside targets. [In contrast, the NQ-100 was forecast to set a lower-degree wave ‘5’ peak in Nov but maintain the potential for a larger-degree wave ‘5’ peak in 1Q ’22… with a sharp sell-off into late-Nov/early-Dec in the interim.]
Recent action is steadily validating the outlook for those indexes to set their wave ‘5’ peaks in Nov ’21 and then enter their largest declines in many months and potentially in the past 12 – 18 months. The Nov ’21 INSIIDE Track elaborated on that with the Russell 2000 possessing major price objectives near 2460/QR… The Russell 2K fulfilled that upside target during cycle highs on Nov 4 – 9 – as equities perpetuated ~60-day/~2- month low-high-high-high-(high) Cycle Progressions at that time.
The initial trading range was set by the early2020 peak near 1710 and the ensuing March ’20 low near 960 and projected a surge to 2460/QR after the Russell 2000 broke above 1710 in Nov ’20 (1710 high – 960 low – 1710 – 2460/QR peak). By spiking to new intra-year highs (fulfilling its weekly trend and monthly trend patterns) AND fulfilling its Elliott Wave objective AND attaining this multi-year upside target, the Russell 2000 ushered in the time for a ‘more substantial sell-off’ in Nov ’21… and potentially longer.
That 2460/QR objective had been reinforced by the Mar ’21 low (~2085/QR) – precisely at the midpoint of that overall projected trading range (1710 – 2460), which supported declines in May, July & Aug ’21. For the majority of 2021, that support (2085/QR) held multiple pullbacks while creating a corresponding trading range target at the same 2460/QR level (1710 – 2085 – 2460/QR). 2085/QR is now the ‘4th wave of lesser degree’ support (the low before this culminating rally) – heightening its significance.
That identifies it as pivotal support for this correction AND the breakdown point if an even larger-magnitude sell-off is in the cards. At the same time the Russell 2000 was fulfilling that synergy of upside targets, the NQ-100 peaked right at its multi-month upside target (~16,700/NQ) and reversed lower – with key support near 15,700/NQZ.
Last week, it turned its daily trend down and quickly entered a textbook 2 – 3 day reactive bounce into Nov 30 – increasing the likelihood for a second drop to lower lows in the first part of Dec. That is taking hold with weekly support and a recently-formed ‘c = a’ downside objective near 15,650 – 15,690/NQZ.”
Stocks are fulfilling the outlook 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 – likely to extend into Dec ’21.
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.
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.
What are ramifications of DJTA, Russell 2000 and NQ-100 attacking multi-month or multi-year upside targets? What does this mean for next sell-off??
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.