Stocks Fulfill Downside Targets & Weekly Cycle Lows; Prepare for Bottom.
09/30/22 INSIIDE Track – “Stock Indices continue to decline from their mid-Aug ’22 highs, peaks that fulfilled a myriad of upside targets in most indexes with many reaching their ultimate 2 – 3 month upside objectives and fulfilling related expectations from the mid-June ’22 projections for ‘the largest rally of 2022’.
It is important to reiterate the significance of those mid-Aug peaks since they set the stage for the drops to new 2022 lows that have now been seen.
At that time, the DJIA surged right to its ~34,200/DJIA objective – the final multi-month upside target for its mid-June & mid-July ’22 buy signals – likely setting its expected 3Q ’22 peak without being able to turn its weekly trend up (that price action was the key factor).
It peaked in between a pair of key weekly cycles – topping one week after a recurring 14 – 15 week high-high-high Cycle Progression but in line with an overriding 33-week high-high-(high) Cycle Progression (that was 1 – 2 weeks shy of a precise ~8-Month Cycle, which is typically ~34/35 weeks).
Simultaneously, the S+P Midcap 400 also peaked in mid-Aug ’22 – within days of a ~21-week low-high-low-high-high-high-(high) Cycle Sequence while fulfilling an over-arching 41 – 43-week low-low-low-high-(high) Cycle Progression and completing a full .618 rebound of its Nov ’21 – June ’22 decline… without turning its weekly trend up. That projected a drop to new lows.
Reinforcing those indexes, the DJTA topped in mid-Aug ‘22 in perfect sync with a 20-week high-high-(high) Cycle Progression while completing successive advances of 33 days each (wave equality).
Not only were those successive rebounds equal in duration, they were equal in magnitude – with both rebounding ~2,600/DJTA points. It was a textbook ‘wave ‘4’ bounce equals wave ‘2’ bounce’ that set the stage for a wave ‘5’ decline to new intra-year lows (now being fulfilled).
Most other indexes failed to turn their weekly trends up during that rally (into mid-Aug ‘22), signaling subsequent drops back to their mid-June lows. That has now been fulfilled… ushering in a pivotal period.
Mid-Sept Reversal Lower
On an intermediate basis, stocks were expected to set a subsequent high on Sept 12 – 16 and then enter another multi-week decline. It was set up much like the April 18 – 22 cycle peak, portending an abrupt sell-off in the weeks that followed.
They peaked on Sept 13 and have since plunged with a majority of indexes now fulfilling their mid-Aug weekly trend signals by dropping back to or below their mid-June lows.
All of the indexes dropped into the latest phase of a 14 – 15-week high-low-low-(low; Sept 21 – 30) Cycle Progression – one of the two most consistent NQ-100 & DJIA weekly cycles over the past ~15 years.
The latest decline is allowing the S+P 500 to finally attack 3 – 6 month support at 3560 – 3610/SPX while the NQ-100 re-tests a myriad of downside targets and 3 – 6 month support levels at 10,700 – 11,100/NQ (2022 HLS, multi-year range-trading support, 50% retracement of Dec ’18 – Nov ’21 advance, test of the Sept/Oct ’20 lows). That could create a bottom.
Meanwhile, the DJIA again attacked its most important level of resistance turned into support – the level of the Feb ’20 and Aug ’20 peaks at 29,200 – 29,600/DJIA – and is spiking below it.
The Russell 2000 is also spiking below critical support, as illustrated on the chart included above. That series of ranges helped precisely pinpoint the 2460/QR final upside target in Nov ’21 and has helped govern price swings throughout 2022.
Wave ‘5’ Lows Imminent?
For multiple reasons, a low at this time – and near current levels – could usher in a longer-lasting consolidation phase before the next decline. That is reinforced by the overall wave structure in most indexes – that are now fulfilling a type of wave ‘5’ declines. However, a bottom must take hold near current levels for that to be the case!
That means that a subsequent ‘a-b-c’ rebound (a rally that is one degree higher in magnitude than the mid-June – mid-Aug ’22 rallies) could unfold and ultimately take many indexes back to their mid-Aug ’22 highs – levels that represent the wave ‘4’ rebound peak on the way down. They are now viewed as the ‘4th wave of lesser degree’ resistance and/or upside targets ONCE a low has been confirmed.
This Elliott Wave potential has its weaknesses, so it should not be considered as ‘set in stone’. That is why I focus on wave characteristics much more than overall wave counts.
The Big Picture (2022 – 2023)
On a broader basis, Stock action continues to trace out parallels to 1973 – ’74 – a strong validation of the 49-Year Cycle – and could do so in 4Q ‘22 as well…
In 1973, the DJIA peaked in early-Jan and sold off for ~7 months before rebounding into a lower high in Oct ‘73.
In 2022, the DJIA peaked in early-Jan and sold off for ~8 months (as the NQ-100 sold off for ~7 months from its Nov ‘21 peaks) and is becoming more likely to rebound into a lower high in Oct/Nov ‘22. The coming weeks, however, represent a very dangerous time when stocks could still spike lower.
In 1973, the 4Q ‘73 secondary high led to another sell-off into year-end, a bounce into Mar ‘74, and then a decline into Oct ‘74 (and retest in Dec ‘74).
In 2022/2023, there are a myriad of corroborating cycles and factors that could trigger something similar to what was seen in 1973/1974 (’similar’… NOT the same; the focus is on the broad parallels). The exact months and precise durations of each move are NOT expected to be identical. However, there are expected to be enough parallels and related moves to warrant close monitoring throughout this period.”
Stock indexes have sold off into the recurrence of an uncanny ~15-Week Cycle that projected a 1 – 2 month bottom by/on Sept 30, reinforced by several indexes dropping to new 2022 lows. More importantly, they have completed 9 – 12 month downside wave structures and project a higher-magnitude rally in the coming month(s). A bottoming phase should now begin to unfold… and could lead to a 15 – 20% DJIA gain in 4Q ’22.
On a broader basis, stocks are reinforcing longer-term analysis for a 1 – 2 year peak in early-Jan ’22 followed by a 6 – 12 month plunge in 2022. See related publications for additional analysis.
How Would Late-Sept ’22 Low Reinforce Overall 2022/2023 Outlook?
Why is Higher-Magnitude Rally Expected in 4Q ‘22??
Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.