I doubt that’s what is occurring here, I still favor a standard Daily Cycle Low here that is likely to produce at least a powerful counter-trend rally. I say counter trend because the worst case scenario is that this coming Daily Cycle rally forms a double top before turning lower towards a true Investor Cycle Low. Regardless, a rally is forthcoming and we know in any bull market uptrend, the dips should be bought.
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After a long and relentless decline, the Crude market has finally enabled us to anchor its Cycles. Up until 2 weeks ago, Crude was locked in a clear crash Cycle, which made it impossible to expect anything other than a continuation of the crash. But now that Crude has reversed with a 20% rally, its moves are clearly the start of new Daily and Investor Cycles.
Based on the duration and the extreme nature of the recent Investor Cycle decline, Crude’s new-found strength is almost certainly the start of a new IC. It’s impossible to know whether the current upmove will be only a counter-trend bounce, but because this is the 1st Daily Cycle of a new IC, we should expect the current DC to be Right Translated.
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It suddenly seems as though the good times in equities might be ending. Though my perspective is based only on “gut feel”, there seems to be an underlying level of fear that has crept into the markets. If so, it’s a real problem for equities. Any market trading at all-time highs and with a valuation far above historical averages requires a continued level of irrational excitement and speculative ignorance to remain sustainable. And fear is not consistent with irrational, speculative ignorance.
When equities price in Risk, it can happen quickly, and I believe the markets are in the early stages of doing just that. Though equities don’t want to believe that significant downside is possible, crashes in commodity prices and massive demand for high quality debt are harbingers of significant declines ahead. In my opinion, the early stages of an equity market decline are unfolding, and it’s only a matter of time before it erupts into a serious event.
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It should not be lost on anyone that this is the same analysis I presented in the Gold Cycle, but on the other side of the equation. The trend for equities is up, so we should expect a continuation. But as with Gold, there’s a lot of evidence that suggests that the long term trend might be changing. More importantly, we should see the potential for long term Gold and equity market trend changes as symbiotic. Equity market weakness and Gold relative strength are inextricably linked.
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