Stocks Project Future Troughs
06/01/16 INSIIDE Track:
“Stock indices – in 2015/2016 – continue to validate expectations for a repeat of (resembling) 2000/2001 with volatile swings in both directions. A new decline – into Oct. 2016 – is expected…
Stock Indices remain positive, having rallied sharply after fulfilling the early-2016 outlook for a sharp decline from mid-Dec. ‘15 into late-Jan./early-Feb. 2016, when weekly/monthly cycles bottomed. Many Indices retested their August lows while attacking their monthly HLS levels AND 2016 yearly support in January 2016.
While the monthly HLS tests project a 3–6 month bottom to follow, the test of yearly support produces a similar expectation – a low that should hold at least into mid-2016. Both of those technical price indicators reinforce cycles that project the next important bottom for June 2016.
That is when a 10-month low-low-(low) Cycle Progression (Oct. ’14–Aug. ’15–Jun. ’16) AND a corroborating (half-cycle) 5-month high-low-low-(low) Cycle Progression (Mar. ’15–Aug. ’15–Jan. ’16—Jun. ’16) recur and portend another low.
Analogues?
One discussion has consumed the outlook for Stock Indices since late-2014/early-2015. That has been the expectation that 2015–2016 would strongly resemble 2000–2001 in the DJIA & DJTA. As recounted in recent months, the DJIA in 2015–2016 has closely reflected what it did in 2000–2001 – primarily the pattern of sharp 2–3 month plunges being quickly met with nearly-equal, 1–3 month surges.
To reiterate, this expectation does NOT mean that every high in 2015/2016 would match its parallel high from 2000/2001.
It does NOT mean that every rally and/or decline would match the timing & magnitude of its ~15-year precursor. However, there have been close parallels… sometimes eerily so…
While I DO expect this analogy to diverge more in 3Q & 4Q 2016 (due to many other competing cycles & indicators), there are still uncanny parallels that should not be underestimated. The relationship between the DJ Transports & Industrials is one of those that possesses unique potential for 3Q ‘16–3Q ‘17.
First & foremost, what this forecast means is that the overall pattern of this bear market would mimic the overall DJIA pattern of 2000–2002, in which the first 12–18 months left most investors scratching their heads (not sure if a bear market was taking hold… or just a corrective phase in an ongoing bull market)…
Looking out a little farther, it is once again the 15–16 month cycle that catches my attention. That cycle has governed so many moves in Stock Indices, particularly since the 2009 bottom.
Interestingly, a look back (one 17-Year Cycle ago) to the DJ Transports in 1998–2000 saw a similar span between critical lows in 3Q ‘98 and 1Q ‘00 – creating a double bottom (~2,300/DJTA).
It would take three of those ~16-month cycles – a 4-Year Cycle (one half of the ~8-Year Cycle discussed on pages 1–3 and described as one of the most consistent in the stock market) – from the DJ Transports’ Oct. 1998 bottom – before most Indices would bottom in Oct. 2002.
Back to the present, the Russell 2000 has also provided some revealing, leading action – dropping sharply (~27%) from its June 2015 peak and bottoming in Feb. 2016… providing initial fulfillment to the parallel described last year (in which the Russell 2K weekly chart looked very similar to the DJIA monthly chart leading into – and out of – the 1973 peak and subsequent crash).
That Feb. ’16 low arrived 15.5–16 months from the previous Oct. 2014 low and projects a subsequent low for June 2017… with an intervening low likely in Oct. 2016 – at the ~8-month midpoint…
To recognize the significance & consistency of this ~8-month cycle (usually 7.5–8 months in duration), consider the following sequence in the Russell 2000 since mid-2011…
8 months high-high (July ’11–Mar. ’12), followed by 8 months high–low ( –mid-Nov. ’12), then 7.5 months low–low (mid-Nov. ’12–late-June ’13) and 8 months low-high (late-June ’13–early-Mar. ’14). The early-March 2014 peak was followed by 7.5 months high-low ( –Oct. ’14; very much like the recent decline), 8 months low-high ( –June ’15) and the aforementioned 8 months high-low ( —Feb. ’16).
That sequence – if it continues to unfold – would likely result in 8 months low–low (Oct. 2016) and possibly another low in June 2017.
In the near-term, the Russell 2000 is projecting a secondary top for the first half of June. If it can set a high at that time, the Russell would perpetuate a 6-month/~180-degree cycle that includes a high (monthly close) in June ’14, a high in Dec. ’14 & subsequent highs in June ’15 & Dec. ’15. A high in early-June ‘16 would perpetuate that Cycle ProgressionAND complete a 50% rebound in time (8 months down/4 months up).
The Russell 2K is also closing in on a .618 (price) rebound – at 1161.2. – the first of two decisive (2–3 month) upside objectives & resistance, combined. The second comes into play at 1183.85–1191.5… and includes the monthly 21High MARC, quarterly LHR and other 3–6 month indicators.
Reinforcing the potential for an early-June peak, many Indices spiked up to their weekly LHRs in late-May – setting the stage for a multi-month peak in the ensuing week(s). The DJ Industrials & Transports also possess daily cycles & daily trend indicators corroborating that analysis. They could trigger a 2–4 week sell signal in the opening days of June. [See Weekly Re-Lay for related updates.]… looking for a drop into late-June… and ultimately into Sept./Oct. 2016.” [See June ‘16 INSIIDE Track for expounded analysis.]
8-month & 15.5–16-month cycles continue to govern Stock Indices and project important lows in Oct. 2016 & June 2017. 5- & 10-month low-low cycles project a more immediate bottom in late-June 2016… that could act as 360-degree precursor to June 2017. Russell 2000 fulfills unique parallel/analogue to 1973/1974 decline and has rebounded.