Stocks Fulfill Outlook for Final Spike Low on Oct 13 CPI Report!
10/13/22 INSIIDE Track Update – “Stock indices and many other markets fulfilled the Oct 12 Weekly Re-Lay Alert analysis for a brief (possibly violent) spike low followed by reversals higher and powerful rallies on Oct 13, coinciding with the release of the Sept ’22 CPI Report. To reiterate:
10-12-22 – “Markets trade on expectations. They are always discounting events (expectations) for the future. When the stock market has been steadily declining and interest rates steadily advancing into a critical CPI Report (Oct 13), the market has already discounted – or ‘built into’ the current price levels – all but the most bearish scenario.
So, when the report is released, those markets immediately pivot their focus to the next ‘big thing’. If the highest CPI in history is reported, but it is not anything beyond what was expected, the current price level (stocks/bonds/Dollar, etc.) already reflects that and could paradoxically head the opposite direction (up).
Of course, it often provides a small window of opportunity for the real novice traders – the ‘Johnny-come-latelys’ to wake up, hear the news, and reactively sell stocks… helping to create a bottom. It then (often) takes off to the upside since there is nothing left – that has not already been considered and factored into current price levels – to drive the market any lower…
If the CPI is wildly bearish, higher than anyone’s expectations, those markets would likely plunge for 30 – 60 minutes… and then set a bottom at significantly lower levels… In cases like this, a multi-week bottom is likely… and it is corroborated by other technical and cyclical factors in Bonds and Stock Indexes…
Stock Indices dropped below their mid-June lows, fulfilling the weekly trend and intra-year trend signals of mid-Aug and cycle downturn in mid-Sept. This reinforces the overall outlook for 2022/23 even as weekly cycles could produce a longer-lasting low at any time… the stage is set for a potential reversal higher tomorrow, with or without an accompanying spike low…
From a fundamental standpoint, several factors continue to point to Sept ‘22 as the ideal time for a peak in multiple inflation factors and indicators…”
The Sept ’22 CPI came out bearish, stocks (and bonds, currencies, metals, cryptos) spiked lower for 30 – 60 minutes, and then they all surged in violent rallies that were/are expected to time multi-week (possibly multi-month) lows.
Stock Indices dropped below their mid-June lows, fulfilling the weekly trend and intra-year trend signals of mid-Aug and cycle downturn in mid-Sept. This reinforces the overall outlook for 2022/23 even as weekly cycles were/are expected to produce a longer-lasting low at this time. The intra-month trends need to turn up to signal a multi-week bottom.
They continue to attack major 3 – 6 and 6 – 12-month support & downside targets at 3560 – 3610/SPX and 10,700 – 11,100/NQ, perpetuating the wide trading range set in early-May – mid-June. They remain in intra-year (and weekly/monthly) downtrends after rebounding into mid-Aug ’22 and retesting year-opening lows – intra-year support turned into resistance – and reversing lower after failing to turn their weekly trends up.
On a near-term basis, stock indexes fulfilled daily trend patterns & daily 21 MACs by spiking to new lows. The recent sell-off had the leading indexes (Russell 2000, S+P Midcap 400, DJTA) twice neutralize their daily uptrends but not turn them down. Combined with the other indexes retesting their lows – and all but the NQ-100 remaining in neutral intra-month trends (not closing below their Oct 3 lows) – that helped formulate the outlook for a convincing reversal higher following the release of the Sept ’22 CPI data.
Stock Indexes still need daily closes above 30,455/DJIA, 3820/ESZ & 11,711/NQZ to turn the intra-month trends up and produce the first signs of anything more than 3 – 5 day bottoms. Those daily closes would also have stock indexes closing above their declining daily 21 High MACs for the first time since Aug 19 – when they completed their ~4-week buy signals and 1 – 2 month uptrends and set multi-month peaks.”
Stock indexes sold off into the recurrence of an uncanny ~15-Week Cycle that projects a 1 – 2 month bottom by/on Sept 30, reinforced by several indexes dropping to new 2022 lows. More importantly, they have fulfilled 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 (see Oct ’22 INSIIDE Track for details).
A final, potentially violent spike low on the Oct 13 CPI Report was expected and could lead to a multi-week or multi-month rally.
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.