Sense, you are good?
A heads-up, am getting out, in the away direction
There is no such thing as a hedge against planetary meteor strike the size of the moon
Rather bet on the way up, as opposed to on the way down, if down
Robert McHugh
Today's Market Comments:
Stocks closed higher Friday, July 1st, on low volume. Since their January 4th all-time high, the S&P 500 has crashed 24.5% through the June 17th, 2022 low.
The chart patterns are clear, this Stock Bear market is not close to being over. They haven't steered us wrong so far, and there is no reason to believe they will now.
The large degree patterns we show in this weekend's newsletter warn that stocks could drop 70 percent or more (from current levels) before it bottoms. Generally, stocks usually drop to the bottom boundary of Megaphone topping patterns, and the starting point of Rising Bearish Wedges. We show those downside targets in charts on pages 33 and 41.
Of more imminent concern, we are convinced a massive stock market decline will be underway by mid-July. Take a look at the pattern in the chart on page 35. This is a large Rounded Bearish Top in the Industrials. It is complete, and textbook. This pattern has a neckline that has just completed. Waterfall declines often follow once the neckline is completed. This is precisely where the Industrials sit right now. We include a snapshot of the textbook resolution for this pattern.
Also, of serious concern right now, in the chart on page 37, we show that the Industrials have completed a right leaning Head & Shoulders topping pattern. This pattern predicts a soon-to-occur decline to 25,000 for the Industrials. This pattern does not predict a bottom. It gives a minimum downside target along the way toward a bottom.
I do not have any idea what fearful events, or "selling reason" events, are about to occur in July, but the patterns are telling us something is coming, and it is not going to be pleasant, to put it mildly. For example, back at the end of last year, we saw patterns warning a stock market crash was about to begin. What the charts did not tell us was the specific "news event" reasons people would sell. The charts just told us they would. The news events did come, including the Russian invasion of Ukraine, the wheat bread basket of the world, and hyper inflation to a degree not seen in 40 years, and the Federal Reserve's hyper aggressive response to hyperinflation. Same thing now. More news events are coming soon that will be a catalyst to sell stocks aggressively soon. We just do not know what those events will be.
On to the wave mapping, which fits with the warnings from the above two patterns. When the next plunge starts, depends upon which of two short-term stock market patterns are occurring. This coming waterfall decline will be three simultaneous wave threes down of three different degrees of trend, waves {3} down of 3-down of iii down.
This next decline, wave {3} down of 3-down of iii-down will perhaps be the worst since the Bear market started. It could be awful. There will be corrective bounces along the way, but the large degree trend is down hard, with lower highs and lower lows. Caution is warranted.
For the next week or two, stocks are in the proverbial calm before the storm. Wave {1} down bottomed two weeks ago, and wave {2} up is underway, and is correcting the recent wave {1} decline. This much we know.
It is possible that wave {2} topped on Tuesday, June 28th. My own feeling is, no, that was not the completion of wave {2}. One reason is that wave {3} down will be powerful, and is not likely to start out calmly, or with oscillating short moves like we saw this past week. Instead, it probably will begin with a bang, with panic selling. So, I am leaning toward the scenario that wave {2} will dangle out there until the middle of July, when the next key cycle turn dates are due.
So, let's examine the progress pattern for wave {2} up from June 17th. We believe it is likely that wave {a} up of {2} up topped Tuesday, June 28th, and the price movement since then has been part or all of subwave {b} down, with {c} up to follow and complete this corrective rise from May 20th.
So short-term, the key question is, what pattern is wave {b} down forming? It could be one of three scenarios: First, an (a) down, (b) up, (c ) down move that completed June 30th; or Second, {b} is forming a sideways triangle pattern, in which case it will need five oscillating waves that could take another week to complete; or Third, it is forming an (a) down, (b) up, (c) down, and is still finishing the (b) up portion, with (c) down taking stocks lower to complete {b} down. In the latter two scenarios, wave {c} up will follow and likely complete the top for {2} in a few weeks. See charts on pages 39, 46, and 49. As more price movement occurs, we will get clarity on which of these two paths prices are following.
Why are we focused on mid-July for trouble? In addition to the timing clues from the above patterns and wave mappings, there is both a Phi mate turn date (July 21st) and a Bradley Model turn date (July 15th) scheduled around the approximate same time period. The Bradley turn date is of major strength. Usually when both of these cycle turn dates occur close to each other, the odds are high that a significant trend turn will occur. So we are increasingly of the opinion that this could be the kickoff of the next major decline.
Trend turns during this Bear market throughout 2022 have been remarkably correlated with Phi mate and Bradley model turn dates.
Money can be made in this economic environment.
Our intermediate term Secondary Trend Indicator generated a new Buy signal June 21st, 2022. It rose 5 points Friday (out of a possible 9 points), to positive + 8.
There were no changes to our short-term key indicators from Thursday or Friday's price action. The Blue Chip three component key indicator remains on a Neutral signal. The NASDAQ 100 three component key indicator remains on a Neutral signal. The small cap Russell 2000 remains on a Buy signal.
Our Blue Chip key trend-finder indicators generated a Neutral signal June 28th, 2022 and remain there Friday, July 1st, 2022. The Purchasing Power Indicator component triggered a Sell signal June 28th. The 14-day Stochastic Indicator generated a Buy on June 22nd, 2022, and the 30-Day Stochastic Indicator generated a Buy on June 23rd, 2022. When these three indicators agree, it is a short-term (1 week to 3 months' time horizon) key trend-finder directional signal. When these three indicators are in conflict with one another, it is a Neutral (Sideways) key trend-finder indicator signal.
Demand Power Rose 7 to 500 Friday, while Supply Pressure Fell 13 to 520, telling us Friday's rise was strong.
Today's Mining Stocks and Precious Metals Market Comments:
Gold fell 5.8 Friday. Silver fell 0.68, and Mining stocks rose 6.30.
Gold is tied up in the Handle portion of its Large Long-term Cup and Handle pattern from 2012. There are typically two possible patterns for Handles. We show both of them from the textbook on page 57. Gold has chosen the more complex, time-consuming pattern. Once complete, a powerful rally will follow.
As for Gold's wave mapping, in the charts on pages 55 through 57, we show the Handle for Gold's Cup and Handle pattern has morphed into a declining Primary degree wave (2) 3-3-5 Flat pattern. It is an Intermediate degree wave A-down, B-up, C-down move. Gold is now inside the final wave C-down, which is declining in a five subwave move. Gold finds itself inside the third of five subwaves for C-down. We show a potential downside price target in the chart on page 55. Once this pattern completes, a powerful Primary degree wave (3) rally will follow.
Silver is finishing a wave 4-down corrective decline. It has further downside needed to complete the pattern. We show the chart and a projected downside price target in chart on page 58. Once it bottoms, a strong wave 5 rally will follow.
In the charts on pages 59 and 60, we show the wave mapping charts for Mining stocks. They are dropping inside corrective wave ii-down. We show a projected downside price target in the chart on page 60.
The HUI key trend-finder indicator triggered a Sell signal June 13th, 2022, as the HUI 30 Day Stochastic triggered a Sell signal June 13th, and the HUI Purchasing Power Indicator triggered a Sell on June 13th. When these two indicators agree, it is a directional signal, and when at odds with one another, it is a combination neutral signal. The HUI Demand Power / Supply Pressure Indicator triggered a Sell signal April 21st. On Friday, Demand Power rose 2 to 364 while Supply Pressure fell 2 to 399, telling us Friday's rise was mild.
DJIA/SPY PPI Rose 3 to negative - 100.21, on a Sell
DJIA 30 Day Stochastic Fast 36.67 Slow 35.33 On a Buy
DJIA 14 Day Stochastic Fast 60.00 Slow 60.00 On a Buy
DJIA % Above 30 Day Average 36.67
DJIA % Above 10 Day Average 60.00
DJIA % Above 5 Day Average 40.00
Secondary Trend Indicator Up 5 to Positive + 8, On a Buy
Demand Power Up 7 to 500, Supply Pressure Fell 13 to 520 Buy
McClellan Oscillator rose to positive + 68.62
McClellan Osc Summation Index Negative - 580.09
DJIA 10 Day Advance/Decline Indicator + 395.2 on a Buy
NYSE New Highs 12 New Lows 205
Today's Technology NDX Market Comments:
The NDX Short-term key Trend-finder Indicators moved to a Neutral signal Tuesday, June 28th, 2022, and remain there July 1st, 2022. The NDX Purchasing Power Indicator generated a Sell on June 28th, 2022, the NDX 14 Day Stochastic triggered a Buy on June 23rd, 2022, and the 30 Day Stochastic triggered a Buy signal on June 23rd, 2022. When all three component indicators are in agreement on signals, it is a consensus directional signal. When they differ, it is a sideways signal.
The NDX Demand Power / Supply Pressure Indicator moved to a Sell Signal Tuesday, June 28th, and remains there July 1st. On Friday, Demand Power Rose 2 to 425, while Supply Pressure Fell 4 to 442, telling us Friday's rise was mild.
The NDX 10 Day Average Advance/Decline Line Indicator triggered a Buy signal June 24th, and needs to fall below negative - 5.0 for a new Sell. It rose to positive + 15.8 on Friday.
NDX 100 Purchasing Power Indicator Up 1 to 185.01 On a Sell
NDX 30 Day Stochastic Fast 34.00 Slow 32.60 On a Buy
NDX 14 Day Stochastic Fast 54.00 Slow 56.40 On a Buy
NDX 10 Day Advance/Decline Line Indicator rose to + 15.8, On a Buy
NDX Demand Power Up 2 to 425, Supply Pressure Fell 4 to 442 Sell
RUT PPI Up 1 to + 152.33, on a Buy
RUT 10 Day Advance/Decline Line Indicator + 246.90, On a Buy
McHugh's Market Forecasting and Trading Report and this Executive Summary from that report is an educational service providing a body of technical analysis that measures the possibility and probability of future changes in mass psychology (swings from pessimism to optimism and back) which identifies possible new trends in major markets within various time frames, from very short term (daily) through very long term (years and decades). The tools we use are based upon price patterns, indicators and other proprietary measures that we have identified as correlative to future market trends. While an investor or trader could come up with ideas and strategies from the information published in our reports, at no time should a reader or viewer be justified in inferring that any such advice is intended by this publication or our other services. We are not offering investing advice, but are only offering some (but not all) of the information that can be used in the investment decision making process with your own personal financial adviser. Investing carries risk of losses. Information provided by Robert D. McHugh's Market Forecasting and Trading Report is expressed in good faith, but it is not guaranteed. The market service that never makes mistakes does not exist. Long-term success trading or investing in the markets demands recognition of the fact that error and uncertainty are part of any effort to assess future probabilities. Please ask your broker or your adviser to explain all risks to you before making any trading and investing decisions. Information contained herein is believed to be reliable, but the publisher cannot be held liable for errors or omissions. No specific advice can be construed from the following. The reader is solely responsible for all actions taken. Please refer also to our disclaimer in the back of the newsletter from which this Executive Summary is derived. Copyright c 2022 Robert McHugh |
