Stocks: 2000–2001 Replay?
03/21/15 Weekly Re-Lay: “Stock Indices rallied back to their highs, allowing the DJIA to retest its multi-year extreme upside targets (18,150–18,550). As long as it does not give a weekly close above18,288, the DJIA is expected to drop into mid-April…
Stock Indices remain in the midst of the decisive period between early-March & mid-April 2015… entering this period immediately after fulfilling multiple, extreme upside price targets in late-Feb. & early-March.
The attainment of those price objectives fulfilled the last of the expectations for the ~2-year advance from early-2013. However, as stated repeatedly, they could attack those upside targets multiple times before a major top takes hold.
For the past 3–4 months, they have remained in congestion, gradually climbing a wall of worry that has been punctuated by multiple sharp drops. As of Friday’s close, the NYSE is right where it was in late-November – so it has gone nowhere (relatively speaking) for almost 4 months.
The DJIA is 0.1% above its late-Dec. high (even as the Dow Transports & Dow Composite are lower)… also a sign of congestion.
The ongoing suspicion/expectation has been that mid-April will produce the first verified signs of trouble in these markets and likely (also) be the culmination of an initial, sharp decline.
And that has been described as a higher-degree parallel to what was seen ~90 degrees/days, ~180 degrees/days & ~360 degrees/days prior – with declines culminating in mid-April 2014, mid-Oct. 2014 & mid-Jan. 2015.
However, there is a better analogy to what has been expected & described. [Keep in mind this does not project a duplication of that previous decline… but a similar occurrence.]…
Traders need only to review the market action in Jan.–April 2000 for this parallel. And that dovetails with my contention that the next bear market will more closely resemble 2000–2002 (as opposed to 2007–2009 or other declines). So, let’s take a look at the first half of 2000…
The Indices set new all-time highs in late-Dec. 1999–mid-Jan. 2000 and then experienced 3 rounds of significant selling in Jan. & Feb. 2000.
Sounds vaguely reminiscent…
They then rallied into March 23/24th – with the S+P & NQ-100 setting new highs while the DJIA set a lower high… a bit like the divergent highs that keep unfolding now.
In many of those Indices, they only broke out to new highs 1–3 trading days before their March 24th intraday peaks. Following that, they entered a ~3-week decline into April 14, 2000.
By the time that 21–22 day drop was complete, the Indices had given the first convincing sign that a Major top was in place. (However, it was not until 6 months/~180 degrees later – in mid-Oct. 2000 – that the DJIA violated its mid-April low… at which time it quickly bottomed and entered another phase of consolidation. Keep these ‘archetypes’ in mind.)
That 3-week decline culminated with the largest point drop in the DJIA in history (up to that point) on April 14, 2000 (‘Black Friday’) – on worries that the Fed would soon be tightening.
(Ironically, in the case of the DJIA, it was retesting 3-month highs on April 12th… just 2 days before that ‘crash’.)
Does that mean the exact same thing will happen in April 2015?
Of course not. The markets ‘reflect’ or ‘resemble’ past events & cycles, but do NOT (for any sustained period of time) ‘replicate’ them.
It will, however, be interesting to see if March 23rd & 24th produce similar events.
As for now, the conclusion remains the same:
The Indices produced signs of a 2–4 week top in late-Feb./early-March but need to give weekly closes below [specific confirmation points reserved for subscribers only] to reverse their weekly trends to down and escalate that signal to the next higher degree.
Stock Indices strengthened the case for an intervening cycle low on March 12th while violating/removing the potential for a quick drop back to those lows. That low created a 38-day high-low-(low) Cycle Progression that projects a future low on ~April 19th.
Overlapping that cycle – as is common in a prolonged period of congestion – a 48-day low (Dec. 16)–low (Feb. 2)–high Cycle Progression projects a peak for March 20/23rd.
In the case of the S+P, that broke down into a 23–24 day low (Dec. 16)–high (Jan. 9)–low (Feb. 2)–high (Feb. 25)–high Cycle Sequence that projected a peak for March 20th.
Coinciding with the parallel to March 23rd/24th, 2000, that makes the coming week a pivotal one – based on fairly short & fairly long-term cycles. For now, the daily trends are back up and would not turn neutral until daily closes below [specific trigger points reserved for subscribers only].”
Stock market fulfilling rebound potential. March 20–April 19th = Historically Decisive Period!!