Stocks Focused on Aug./Sept. ’19 Danger Period; 40-Year Cycle & 4-Year Cycle Portend Bearish Aug. ‘19.
06/29/19 INSIIDE Track – “Equity markets remain in what is expected to be a multi-year (wide) trading range, experiencing a series of multi-month rallies and multi-month declines while confined to the same range. A decline into Aug./Sept. 2019 is expected…
Stock indexes remain in a wide trading range, continuing to reinforce the 40-Year Cycle parallels to 1978/1979. There are many corroborating reasons for that similarity, not simply a 40-Year Cycle, but that analogy provides an illustration of a time when market movement unfolded similar to what was/is expected in 2018/2019.
Current expectation for other markets, like interest rates, currencies, metals & commodities reinforced this general outlook. For starters, the overall period of 2018 – 2022 was forecast to experience at least four corrections of 10 – 20% during this period – just as in 1978 – 1982 – with powerful rallies before and after those declines.
On a little more precise basis, 2018 traded in very similar action to 1978 – exactly 40 years prior.
In 1978, the DJIA set a 6 – 9 month bottom in February and then rallied into Sept./Oct.. In early-Oct., equity markets abruptly reversed lower and dropped sharply (15 – 20%) into/through Dec. 1978.
Similarly, 2018 saw a 6 – 9 month bottom set in February followed by a rally into Sept./Oct. In early-Oct., equity markets abruptly reversed lower and dropped sharply (15 – 20%) into/through Dec. 2018.
In 1979, the DJIA rallied – in three distinct waves – throughout the first quarter, peaking in April ’79 and then selling off for a month. In 2019, the action was similar (not exact, but similar… history rhymes, it does not repeat).
Following that ~month-long sell-off in 1979, the DJIA rallied to new intra-year highs into 3Q ’79 – ultimately retesting the 1 – 2 year peak it set in Sept./Oct. 1978.
In 2019, the DJIA is acting similarly. More than anything, the focus is on the likelihood for a wide and volatile trading range that results in a multi-year sideways pattern (generally speaking) in 2018/2019, just as it did in 1978/1979.
In 1979, the retest of the previous year’s peak resulted in a new 1 – 2 month sell-off that was very similar – but not quite as damaging – as the 4Q 1978 decline.
In 2019, expectations are similar – based on a host of other indicators and cycles. Stocks are retesting their previous year’s high (the Sept./Oct. ‘18 peaks) and are expected to see a new 1 – 2 month sell-off – with current cycles and related timing indicators portending a low in Aug./Sept. 2019…
While this is intended to reiterate the broad-stroke outlook for 2018/2019 (and even more general expectations for 2018 – 2022), it is equally important to pivot the focus to current action, current (more specific) cycles & technicals, and current expectations.
The Price Filter
The general outlook for 2019 was to see a rally into May (from monthly & yearly cycle lows in late-2018 that projected at least a 6 – 12 month bottom) – with key stocks and indexes expected to spike to new highs while others peak just below their 2018 highs. Weekly cycles honed that outlook and helped pinpoint the late-April peak in equities.
That resulted in a decline into May 31, when the weekly trend patterns (price action) projected a subsequent rebound… Stock Indexes adhered to that analysis but turned their weekly trends back up in the process.
That pattern reinforced the likelihood for a late-June sell-off but portended a rally to new rebound highs to follow. This shorter-term action has not done much to alter key overriding indicators, one of which is the monthly trend.
The monthly trend triggered an initial reversal down during the 4Q ‘18 sell-off. That usually triggers a reactive rally, which has since unfolded. The ideal pattern for that rally is to see the monthly trend turn neutral (from down) but not turn up.
So far, that is what has transpired in most indexes… Until those monthly trends reverse up, equity markets remain in an extended (wide) trading range – some of which date back to Jan./Feb. 2018.
3 – 5 year equity traders & investors could…”
Stocks remain focused on Aug. ‘19 bearish cycles, casting shadows ahead for a sharper decline. 40-Year Cycle & 4-Year Cycle project increasing trouble in/around Aug. ‘19… with a Aug. ’15-style sell-off becoming increasingly more likely! What would Aug. ’19 sell-off mean for 4Q ‘19?
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.