EXCERPT: Intra-WeekAlertfor Friday – Sept. 25, 2015
“The Edge of the Abyss II”
It would be extremely dangerous to underestimate the potential for another sharp downdraft in Stock Indices, in the first half of October.
In 2014, the sharpest downdraft occurred between Sept. 15--19th and Oct. 13--17th.
In 2015, equities set an intervening high on Sept. 14--18th. Could a similar sell-off accelerate into Oct. 12--16th?
In 2011, the largest sell-off of the year - and the largest sell-off since 2008 - culminated on Oct. 3--7th.
In 2012, October experienced continued selling through the month, part of the 2nd largest drop of that year.
In 2013, stocks experienced their 2nd largest decline of the year - culminating on Oct. 7--11th.
In 2008, October was the worst month of the entire 17-month collapse (with the DJIA having an intra-month range of ~3,000 points from high to low).
In Oct. 2002, Stock Indices culminated a ~2.5 year bear market.
And, Oct. 1997 & Oct. 1998 saw the culmination of successive sell-offs (a factor contributing to the 17-Year Cycle that helped mold expectations for a sharp decline in late-Apr.--late-Sept./early-Oct. ’15).
And, of course, most market participants don’t need to be reminded of the bearish events of Oct. 1929Oct. 1987, not to mention Oct. 1989. Similar to many of the recent years, Oct. 1990 also culminated a July--Oct. sell-off (much like 2011) and then set a multi-year/multi-decade low.
And there have been many other examples. The simple point: October is always a vulnerable month!
But this is NOT a discussion on an annual cycle, dealing with the month of October… although that adds to the synergy. It is a discussion on extreme price levels being attacked…
China’s Index remains precariously close to its late-August low (~2927) - that already represents a drop of 43% from its high. It is also the last plateau - on the way down - prior to the 5+-year lows around 2000. So, if it convincingly breaks & closes below 2927, the Shanghai Composite could (again) accelerate down to Major support around 2000… and erase its entire, multi-year advance.
And then there’s the Ruble, also hovering dangerously close to multi-decade lows after losing 70% of its value between 2008--2014. As explained before, it is often the final exhaustive sell-off that triggers the most extreme reaction in other markets.
So, any of these markets - if they were to convincingly break below 2015 lows - could trigger another significant round of selling in US (and global) Stock Indices.
That is also why they call it ‘the straw that broke the camel’s back’. The ‘camel’ was able to uphold an increasing weight of burden being placed upon its back… over & over again… until that one final pound or ounce of weight overwhelms the strength & stability of the legs supporting that weight.
When that does happen, it is not a case of the ‘camel’ slowly and steadily dropping to its knees - making sure not to disturb the enormous load on its back. No, at that point (even though it seems like such a small ‘straw’ or economic event being piled on), the entire structure comes tumbling down…in a hurry.
(continued on page 2)
Eric S. Hadik -- Editor Page 1 of 3 Copyright2015INSIIDE Track Trading
POB 2252 Naperville IL 60567 630-637-0967 630-585-5701(fx)
EXCERPT: Intra-WeekAlertfor Friday – Sept. 25, 2015
“The Edge of the Abyss II”
And that is what I described in 2007, and which ultimately transpired, with regard to the US Dollar Index expected to‘cross the Rubicon’- triggering those last few points of downside… a very small percentage of its overall decline.
Less than two weeks later, and while the Dollar was reinforcing that breakdown, Stock Indices entered what would ultimately be a 50% collapse.
Why did Stock Indices ignore a 6+-year plummet in the Dollar and only react negatively when the Dollar dropped to new 40-year lows. Let’s refer to Hadik’s Axiom of Market Correlation:
“Markets only follow other markets when the lead market is going parabolic or is in an extreme phase. Also, correlations are only effective when you can be CERTAIN of the current focus of traders.” [Emphasis added]
The Dollar entered an ‘extreme phase’ of bearishness when it broke below its 40-year low. At that point, I believed it became the ‘current focus of traders’ and the rest is history.
In 2015, a triple-whammy of trigger events was anticipated:
1 - Euro plummet.
2 - Russia turmoil & Ruble ‘demise’.
3 - China ‘chaos’.
The seeds for all three have been tilled, planted, watered, sprouted, fertilized, grown, nurtured, fertilized again… and are very near the point of blooming into full-blown maturity. It would only take an additional 5% - of the moves that have already been seen - to likely trigger a disproportionate and panicked response by all those calm & cool, level-headed investors & speculators around the world.
Just because they are on the ‘edge of the abyss’, does not mean they are going to instantly fall into it. It doesn’t even guarantee they will fall at all. But, there is now virtually no room for error left. And that is the time in which a seemingly innocuous event or surprise could be just enough to prompt those markets to breech support… and trigger an avalanche of selling.
There are two other (Stock Index) reasons I wanted to publish this additional Alert…
Stock Indicesdid (just) fulfill the potential for a brief bounce with all three Indices providing fairly precise 50% rebounds (of the recent declines) with the DJIA spiking above its daily LHR today. All three are testing & holding daily 21 MAC resistance as the daily 21 MACs are beginning to turn back down. So, a new decline could begin today.
That update - on the analysis from the Sept. 23rdAlert - is the first reason for this Alert.
The second is to address a couple additional downside targets - for the month of October - that are corroborating at least one key downside objective…
As explained last Nov. & Dec., the Indices were expected to suffer ~20% corrections in 2015, ideally between late-April--late-Sept/early-Oct. 2015 (in synch with the 17-Year Cycle). Many have already accomplished that… or come very close.
(continued on page 3)
Eric S. Hadik -- Editor Page 2 of 3 Copyright2015INSIIDE Track Trading
POB 2252 Naperville IL 60567 630-637-0967 630-585-5701(fx)
EXCERPT: Intra-WeekAlertfor Friday – Sept. 25, 2015
“The Edge of the Abyss II”
In the case of the DJIA, a drop to ~14,700 would accomplish that. However, there were other key downside targets (and an extreme intra-year downside objective) around xx,xxx/DJIA. That, as just stated, is the extreme downside objective for all of 2015.
The interesting thing is that the monthly HLS for October is currently shaping up to be at xx,xxx/DJIA.
And, a simple ‘decline = decline’ wave target would project the next wave down to approach xx,xxx/ DJIA. [End Excerpt.]
The Indices has just fulfilled expectations for a brief rebound and are poised to resume their projected Sept. 17--Oct. 9th decline.
Critical - and revealing - downside price targets are taking form and/or being reinforced, increasing the potential for acceleration lower. The action of Sept. 25--30th needs to confirm. The Sept. 30th close should corroborate this scenario.
Please refer to current publications for more detailed analysis & trading strategies..
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Eric S. Hadik -- Editor Page 3of 3 Copyright2015INSIIDE Track Trading
POB 2252 Naperville IL 60567 630-637-0967 630-585-5701(fx)