Stocks Trigger New Buy Signals; NQ-100 Targets 13,800/NQ.

01/31/23 INSIIDE Track – “Stock Indices continue to trace out a bottoming phase, first creating a pair of divergent lows in mid-June & late-Sept/early-Oct ‘22 (double bottoms in some indexes) – setting the stage for a pair of escalating rallies, each projected to be greater than the preceding (2022) rallies.

That fulfilled related 4-Shadow Signals and other corresponding indicators and set the stage for another surge in 1Q ‘23.  Throughout 4Q ‘22, the DJIA was forecast to surge from below 29,000 to above 34,400 – perpetuating and fulfilling a 12-Year & 24-Year Mid-Term Election Cycle that projected a ~20% surge in 4Q ‘22 – similar to what was seen in 1998 and 1974.

That cycle included double-digit, 4th quarter gains in 1962, 1974, 1986, 1998, 2010 and now 2022.  It also  included 20% or greater 4th quarter gains in 1974, 1998 and now 2022 – perfectly fulfilling both the 12-Year & 24-Year Mid-Term Election Cycles.

The DJIA led that rally, fulfilled those cycles, and has since consolidated as other indexes have taken the lead and rallied to new multi-month highs after fulfilling the outlook for new rallies in January.  Two of those are again worth discussing…

Small Caps/Mid-Caps

The Russell 2000 and S+P Midcap 400 both set double bottoms in late-Sept/mid-Oct ‘22 – bottoming precisely where they had previously bottomed in mid-June ‘22.  As a result, they have been in various forms of consolidation for 7+ months – revealing developing underlying strength leading into Jan ‘23.

In the case of the S+P Midcap 400, it has nearly made it back to its mid-Aug ‘22 high (the same target level & 4th wave of lesser degree resistance the DJIA reached in Dec ‘22) and is expected to surge to ~2800 in 1Q ‘23.

The Russell 2K could still make it up to ~2050 – 2100/QR after it, too, turned bullish in early-Jan ‘23.  (That would also be a 50% rebound of its 2021/2022 decline.)

Leading this latest rally has been the Nasdaq-100 (finally) which spiked to a new multi-month low on Jan 6, ‘23 and then entered a ~14% surge in the ensuing three weeks – taking it right back up to the highs of Nov & Dec ‘22 (~12,200/NQH).  It should ultimately surge to at least ~13,500 – the mid-Aug ‘22 high.

What Next?

In the process, the NQ-100 reversed its weekly trend up – a lagging and confirming indicator that often reverses within 1 – 2 weeks of an initial peak… that could time a peak by/on Feb 3… Regardless of near-term action, the overall outlook remains for a strong rally from late-Dec/early-Jan into March ‘23… the second rally in this larger rebound.

The Big (ger) Picture

The action of late-Sept ‘22 reinforced that an initial 6 – 9 month decline was likely complete and so a larger-magnitude (‘B’ wave) rally should follow.  The monthly trend structure concurred.

The S+P 500 is still setting up a convergence of upside targets and monthly resistance levels around 4300 – 4350/ES… that could be tested before a ‘B’ wave rally is complete.  That is where the mid-Aug ‘22 peak overlaps the July – Oct ‘21 lows (support turned into resistance) and is just below where the monthly 21 MAC is peaking and flattening.

In March ‘23, the monthly 21 High MARC will reach 4305/ES and continue to rally in the months that follow.  That would begin to exert a negative influence on the inversely-correlated monthly 21 High MAC.

Similarly, the NQ-100 is likely to see a sharp surge toward its mid-Aug ’22 high (~13,800/NQ), which would also represent a doubling of the Oct/Nov ’22 rally and a doubling of the Jan ’23 rally – two examples of potential range-trading in which the NQ-100 has traded between 10,400 & 12,100 for most of the past four months and could surge to ~13,800/NQ on a breakout above that range.  That would also represent a precise 50% rebound of the 2021/22 sell-off…

On a broader perspective, lower lows are still expected in 2023… in at least some of the indexes.  From a general standpoint, that would perpetuate the parallels to 1973/74 that have been in focus since late-2021 and which projected the 2022 sell-off.

In 1973/74, stocks experienced a dramatic sell-off with many stocks losing more than half of their value… some significantly more.  In 2022, that has already occurred in many leading ‘proxy’ stocks (NFLX, META, TSLA, AMZN, etc.) that have been clobbered.

With 2022 representing the culmination of a myriad of cycle highs in stocks and stock indexes (including 20-Year & 40-Year Cycle Progressions), many of those peaks are likely to hold for several years.  So, we could be in for a few years of wide trading ranges.

3 – 6 month & 6 – 12 month/1 – 2 year traders and investors should have exited long positions in early-Sept ‘21.  1 – 2 month traders were triggered into longs in mid-Oct & exited them in early-Dec.  Early-Jan – early-Mar ‘23 is the latest bullish period.”

Stock indexes are fulfilling 4-Shadow Signals (triggered in 4Q ’22) that projected new surges in 1Q ’23.  Indexes like the Russell 2000 & S+P Midcap 400 are nearing their upside price targets (accomplishing what the DJIA did in 4Q ’22) while the NQ-100 and S+P 500 are projecting higher levels (~13,800/NQ & ~4300/ES) before their advances would have a better chance of peaking.

Those upside targets – and how/when they are reached – should reveal a great deal about what to expect leading into key cycles in late-July/early-Aug ’23.

What Did/Does 4Q ’22 4-Shadow Signal Portend for 1Q ‘23?

How High Could Latest Rallies Reach?

What Would Likely Follow Tests of ~13,800/NQ & ~4300/ES?

Refer to latest Weekly Re-Lay & INSIIDE Track publications for additional details and/or related trading strategies.