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    MarketMap2022 Issue#8

    March 14, 2022

March 14, 2022

MarketMap2022 Issue#8

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MarketMap-2022 Scenario Planner Issue#3
dated 1/16/22

“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 AOD (long bars) 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, and 2000 are prime examples. These seasonal peaks marked the beginning of severe bear markets.

The top tick occurred 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 a long bar range day of 6.6% followed by a test and break of that low into another panic low on June 22, 1962. Two keys here, the month of 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.”

Of near-term impact, it’s worth pointing out that in the 1/24/22 MarketMap Issue #4 the following: 

I pointed out “A near-term or temporary low is expected later this week followed by a minor reflex into 2/4/22 +/-. The bigger or more numerous nesting of dates shows on March 9 through 16, which also lines up as a high in the scenario charts from Issue#1. I would see it as a cycle high, in this case, it will likely be more of an I-T peak. That high came in on 3/3/22, and the cycle is lower.

The Nasdaq composite on the right has completed the initial five wave structure lower into [1] and a simple countertrend taking back about 30% of the decline at the high on 3/3/22, which finishes off [2]. There is no sense in getting into alternative scenarios here. Contrary Thinkers will stay the course given the amount of evidence in a bear market favor, especially when it is not being seen by others more focused on the war or the interest rate hike.

Here at the end of the first quarter and the start of spring and the second quarter there is a cluster of geo-cosmic events that are worth pointing out. Not their particular aspects, rather when they all happen in close proximity as they will be starting this week. This is not a highly efficient method for picking top tick or bottom tick. Rather it increases the likelihood of the scene captured in the January fractal, the 1962 charts and the chart below of 1910 are in gear and will have their impact.

More on these events and influences in the next issue. However…

…the more traditional technical analysis on the US markets continues to signal a bearish outlook. The diffusion index seen above with the Dow and the Nasdaq composite continues to show an expansion of new lows vs new highs and diverging from the minor advance put in by these two markets.

The two textbook examples of EWT wave structure are provided as ideal examples of the two current charts of the Dow and Nasdaq shown above. The Nasdaq is a clear five-wave structure like the first textbook example, and you can see that you as an investor trader are at point [2] (2 in the circle). With the Dow, it is a one-two series of smaller degrees. A teardrop formation is what I have called leading to a waterfall decline as seen in the second textbook example.

The following chart provides a big takeaway for traders regarding the existential fact for most investors it tops that are more difficult to call than bottoms. The only thing a good investor/ trader needs at a tradable low – besides these two indicators (today only being used on the daily bar for short-term purposes) is guts to buy. I say this because by the time it is clear to the media why the market is falling, or they have media sensationalized a negative background emotionally it can be rough for many to buy.

However, here are just two indicators, the Smart Money Index and the Panic Index, which are very efficient at picking S-T bottoms.  In the last year, the BTFD method did not wait for the low risk buy signals seen here, which will be their downfall over the coming months.

With that said, there was no low risk buy signal on 3/8/22. What several market observers are realizing here is that we are witnessing a correction without any panic. Something the bulls want desperately because it is awash out, part of a correction and a buy signal!

However, it’s too late, to be just a correction, Contrary Thinker’s definition of a bear market is a mini panic or long bar range day most happen within a month of the ATH.

Also, there is evidence that a full-on panic will be seen sometime between mid-September and late October.  More on that topic is below and in the next issue regarding geo-cosmic influences.

But it is worth pointing out the flight from glamor-growth to value, has spilled over where the shift is from value stocks into commodity-based shares. So, the generals of the Great Bull Market (FAANG) are hitting the skids and the place to be is in anything that looks like a turnip or steak or something you can eat to give you energy, just not your car and new alternative forms of energy.

The featured FAANG chart is on the ledge, taking out the I-T support zone is just another nail in the coffin. TEM supports a breakdown here.

The following chart shows the traditional cycle, which from bottom to top to bottom follows in the bonds first to inflation last. But what the chart only hints about are there is a point when they are all going up at the same time to some degree and all going down at the same time to some degree.

Since the advent of electronic markets and systematic trading, the flow of funds has been from “on risk” to “off risk” virtually everything. It’s referred to as hyper-correlation. The big inference here is that at some point, the COTs line up for a blow-off peak in the commodities in May, from which point there will be no place to hide if you are a long-only style of investor. Stay tuned.

Risk assessment.

The featured chart here shows the cycle from March 2009 low unfolding a Fibonacci 13 cycles back-to-back calling the high only four days early.

From the ATH, the first cycle lower target is 32191.20 and the I-D low has been 32,272. That price area is nested with a Fibonacci retracement at 32,416.00. So, a break of that level should act as an acceleration point. The S-T volatility model supports carry-over from breakout moves now.

S-T trading cycles are moving into a period when long bar – range days – are more likely. From high to low range breaking 4% in a day. That period runs from today into the 18th.  The next COT is expected at the soonest this Friday and into 3/22/22. If the above price support zone, which everyone is focused on, breaks, sentiment will shift quickly to the raise cash mentality before it’s too late.

The next Dow target in the cycle is 27,246.40, but it will take another full cycle to get there. If true, the low expected around the 20th of March will be only good for a very short period of time, with the next cycle low expected at April 16 and the decline may stretch two-cycle into the May panic Contrary thinker is looking for.

The market may not see major support until 9/15/22 through 10/23/22 at the 18k to 19k level on the Dow.

In the public social media sphere of influence, you see many information providers purporting market fractals that they say look just like today’s market, and I have yet to see their work justified.  MarketMap anchors its models on a variety of “different” methods and when they all look the same, it gives that scenario credibility.

One of the models is the Event-Based Cycle which depends on when the major turns happen. The opening market narration regarded the peaks in late December to early January as all having similar market outcomes as well as being associated with national security events. (See my MarketMap 2018 January 18).

Another method is the 56yr/9yr matrix that puts 2022 in the same cycle as 1909-1910 and 1966. Most members can look at 1966, so I included the 1909-1910 chart. Looking back at all the issues of MarketMap and the annual map published, you will see every close parallel between them all.

There are few updates in the COT Table, but I have extended the view out another month. Keep in mind there is no such thing as an absolute in the markets, in heaven but not on earth. The dates of no signals should be used in conjunction with other tools.

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Jack F. Cahn, CMT

Contrary Thinker since 1989,
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