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    MarketMap2022 Issue #3 EBCs

    January 16, 2022

January 16, 2022

MarketMap2022 Issue #3 EBCs

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A “bear market” is a decline of more than 20%. Preceded by a bull market of more than 20%.

The “New School of Technical Analysis” has moved beyond arbitrary definitions.
MarketMap-2022 Scenario Planner will focus on similar expectations based on peaks with near-identical tidal extremes during the same seasonal period.

The seasonal bracket is the best fit for Dow Jones Industrial peaks from

December 11 to January 15.

Bull market peaks that occur in December or January produce a seasonal pattern that repeats itself. Seasonal patterns, for example, similar intervals from top to a panic low. Plus, they produce two long bar declines that occur at a fixed interval as well. These mid-winter seasonal peaks have also been followed by geopolitical events that have caused financial distress in the markets. This latter point is critical as the market does not anticipate national security events well.

The tops in 1961, 1973, 2000, are prime examples. These seasonal tops marked the beginning of severe bear markets. What is more than a coincidence, worldly events followed each with security threats in mid-October during the year ( 12 months following ) of the high pivot. What is even more striking is another political or national security event that occurs in August to November of the ensuing year 1962, 1974, and 2001, respectively. 2018 was only a correction and an exception.

I feel this is essential to know because literally, no one is pointing to geopolitical risk here that would cause any financial distress.  Beyond the obvious listed previously: Russia Invaded Ukraine; China/Taiwan Conflict; the USA takes military action against Iran; and a major cyber attack upon the USA or its Allies.

Since 2018, the potential national security threat is a constitutional crisis in the USA with parallel right-wing terrorist attacks. This is nothing I am promoting, I am not attempting to persuade anyone into this probability, it is a warning that only a few are considering.

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Here are the four seasonal examples of bull market peaks in the winter season. 

This table shows similar peaks to low intervals in the following three primary scenarios, with 2018 being an example of a correction.

The top tick occurred on December 13, 1961

This peak preceded a decline over five months to a panic week in late May followed by another panic week in late June 1962. The market action that day May 28, 1962, was an AOD of 6.6% followed by a test and break of that low into another panic low on June 22, 1962. Two keys here, May runs a close second over the history of the NYSE and before as a month of panics. The other is the six-month interval from peak to panic low.

The decline from the 12/13/61 high took 25 weeks into the June price low. Along the way, the first long bar decline day was 4/13/1962, about 4 months after the high pivot. As such it signaled a bear market was unfolding, and on that day the market broke under the 5% band suggesting that institutional types should begin to sell.

Long bar days do not happen near market highs when bear markets begin, full stop. They happen to shake out weak hands during a correction of a bull trend.

The bigger suggestion here is for aggressive hedging to be engaged as volatility increases (VX), counting into a COT to anticipate when long bar reversals should begin. From the first long bar day – mini panic at 90* degrees, it is six and seven days into the next AOD declines of 5% and 6.6%. On day 8 a long bar advance followed from open to close up 10%.

The decline within that short two-day period had reached two times the 5%  big boy bands, a good time to trade for a one-day wonder reversal and 8 days or 1/4 of the cycle.

That AOD advance was 10%. If you are hearing seven days often, that is because it is the 7-day cycle we are taking advantage of. It is 1/4 cycle or 7.38265 and 1/8 of a cycle 3.691325 days.

Furthering the illustration, eight days from the near-term high on 6/1/62 the decline ended in a mini panic day of 7%.  Three days after that mini-panic low the Dow staged another one-day advance of 7%.  At that point, the volatility ended. That low was tested by the Russian Missle Crisis in October and a long bar decline of 5%.

Nifty Fifty top 1973

At the time this was the largest bear market since the 1929 crash. From January 11, 1973, to December 9, 1974. It was the lowest volatility bear market in history, doing as much damage to share values in terms of time as well as price action without providing any great tradable moves until the August to October 20% recovery.

The DJIA record high on January 11, 1973, was followed by a protracted and severe bear market. On October 17, 1973, Arab nations imposed an oil embargo on those countries supporting Israel in the Arab-Israeli war. Fears of a global recession spread throughout world financial markets. Further declines accompanied the impeachment and resignation of President Nixon in the summer of 1974 until a final bottom low in October/ December 1974.

The key repetition here is a geopolitical event effectuating the year of the early winter peak followed by another national security or political event manifesting the year following.

Along the way, there were no mini panic days or one-day wounders to speak of except the mini panic in late August, which should be a takeaway for students of the market. Panic days, long bar days that happen over 4 months after the peak, are a signal of a reversal not the beginning of a landslide. In this case, it was a leading sign for an I-T correction of the bear market.

NB: An insight from the above table is the strong tendency of the market to be weak into June +/-  fitting the overlay charts from the previous issues. Based on the counts for 1961 and 1973 suspect a tradable low 7/16/2022 +/- provides a bracket of 6/21/2022 and 8/15/2022.  Also, if the market is in a hurry a mini climax can be projected with a 1/4 cycle to 2/26/2022, which is within the historical realm of a bear market, not a correction. Lastly, October for a change looks like it will be a real jinx month, nothing to simply pay lip service to. 

The Internet or dot-com bubble

In 2000 the Dow made its high pivot on January 14. Nine months later, just like ‘61 and ’73, in October, a suicide bomber attacked the USS Cole in Aden harbor (Yemen), resulting in 17 deaths and dozens of injuries. The terror event caused investor panic, with the DJIA declining by -3.64%. The AOD date was Thursday, October 12, 2000.

2018 was the Perfect Market Bubble following the lowest volatility year in history.

Based on this seasonal pattern, the peak in 2018 was outside the seasonal breaker. Market Map-2018 along with its other tools on the 18th of January gave an “off risk” signal. In other words, raise cash. We also engaged our hedging robots on TradeStation.

At that time MarketMap concluded that ” it (the ATH) will be followed by a series of Annual size One Day declines culminating on August 8 and October 19 with panic days caused by national security threats. That is roughly Contrary to Thinker’s outlook as of this issue #3. However, based on the working assumption that the next 18 months will be a bear market, there will NOT be any long bar days until the market moves further away from its ATH.  That information will be shared as the dates become closer.

While CT was right in calling the peak, the panic set in too early telling smart investors that the decline was only a correction. So its pattern would not fit with the three seasonal peaks layout above. Yet,  just like the three where there was an event in October that lead to climactic action, on 2 October 2018, Jamal Khashoggi, a US-based journalist and critic of Saudi Arabia’s government, walked into the Saudi consulate in Istanbul, where he was murdered.

An event that could have had a ripple effect with a different geopolitical background.

To date it is not talked about after months of conflicting narratives emerged over how he died, what happened to his remains, and who was responsible.

The first two trading sessions of 2022 January 3 and 4 were rally days, which starts the year in model form. Thus far Dow & Co is running alongside the scenario planner’s best fit.

But not perfect, but confident thus far.  The only variance is the placement of the high in the tidal cycle.

All of the highs shown above, and the peaks not shown made their high pivots near the first quarter of the lunar or tidal cycle, which is at 90* (degrees.) The peak on December 3, 1886, hit 91*, before a bear market; and the counter-trend peak in 2009 on January 2, 2009, hit 68* degrees, preceding a decline of 29%.

The chart shown here reflects the high that came in near the full or completed cycle of 360* degrees, at 24*.

That is 1/4 of a cycle away from having 100% commonality with the high pivots outlined above.  The 2022 secondary high happened at 120 degrees, which was a hotspot in retrospect. More on that in the coming issues. This does not preclude a primary peak from being in place or the pattern of the bear market unfolding in line with the history outlined above.

One thing to keep in mind is on previous occasions when the market’s high pivots occurred at the end of the 28 1/2 day cycle (aka the beginning of the 28 1/2 day cycle ) it has been followed by massive bear markets and panics.  Here are three historical examples: The top Sep 05, 1899, is ranked number five as one of the worse. The panic hit on December 18th, 1899. Amidst a series of banking panics, the Dow Jones Industrial Average – newly created in 1897 – crashed by 8.7% in a single day, the largest drop in the 19th century.

Two other highly recognizable bears peaked at zero degrees, on September 03, 1929, and the peak on August 25, 1987, was at 13* degrees.

Scenario Map to Date

Seen here is the first draft of the annual map. It suggests an ATH on the 4th by the Dow and the market’s trend should continue lower into February 17th +/- a day.  Since the shortest dominant cycle is 28 1/2 days, from COT to COT, the cycle low expected January 20 +/- will only lead to a quarter cycle (minor) recovery. Volatility Reports will assist with the dynamics of that.

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Contrary Thinker since 1989,
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