TL;DR

We had our 3rd red week in a row as the weekly cycle decline continues. We knew we were in the declining phase of the cycle since the update on the last week of August when we formed the weekly swing high after the Jackson Hole speech. Keep in mind we’re also declining into a 3 year cycle low so even after we get our low for this weekly cycle we would expect at least one more left translated and failed weekly cycle which would take us into early 2023.

The Daily Cycle

Friday was day 18 of the daily cycle and the daily cycle high was on day 4. That is an extremely left translated cycle as it’s rare that we get a DCH so early. This is another example of the importance of being nimble and following the price action. I get questions on Twitter about cycle counts and what the usual timing bands are. This is a misperception people have. In reality, price will always do whatever it wants and its our job to analyze. This means sometimes you get an extremely early DCH and you have to just roll with it. The same is true about our coming DCL. Since we’re already at 18 days, we could get a DCL at any point now. The key is to wait for a swing low and then observe how it follows through (or fails to do so) on the higher time frames.

In terms of immediate expectations, we had a very short term bounce on Sept 27 which has served as our lower high. We should get another bounce within the next few days but it’s impossible to know how long it will last. The fact that the Sept 27 rally failed the very next day is telling us the market is very weak so we may not be able to string together a multi-day rally for the next few weeks. This is a scenario to prepare for where the best we get are one day rallies that get sold off the next day.

The jobs report on Oct 07 will be one of the next big catalysts. We’re at a point where the market will latch on to any economic data available as people grow more concerned that the Fed will commit a policy error. Even more significant is the next CPI release which will happen on Oct 13 at 8:30am. The last release was literally the start of this current trend leg lower as we gapped down and never looked back.

This takes us to our weekly chart structure where we may see something similar with 3 weeks down and at best 1 week up before another leg lower.

• Current Count: Day 18

• Previous Daily Cycle Low: Day 54 (9/6/22)

• Current DCH: Day 4 (Sept 12)

The Weekly Cycle

This past week was week 15 and we closed as another down week and making fresh lows for the year as other indices and sectors had already confirmed. As discussed in this video, we should expect downside through the rest of the year at the very least though a violent short covering rally may be just around the corner. What’s needed is some kind of catalyst but the good news is we will see that in the charts in real-time.

Since we know the daily cycle is declining and the weekly cycle has been declining since week 9 it puts us in an awkward position where structurally we need a bounce to keep the trend of lower lows and lower highs going. This is a critical thing to understand especially for anyone inclined to be aggressive and try to short. Prices trend so there will always be counter trend moves while price is moving to its final destination. In this case that destination is lower but we have to expect small rallies along the way that can actually be used as selling opportunities.

The other important thing to note is the 200 week moving average. As I called out in a tweet, during the Global Financial Crisis, SPX dropped more than 50% below its 200 week moving average. Consider the fact that we are just now flirting with the 200 week moving average. An indication we may be relatively early in the decline which sounds crazy since we’ve been in a downtrend since the beginning of 2022.

I’m not implying we will fall 50% below the 200 WMA again but you have to imagine we will at least get meaningfully below it and may stay there for at least a few months. This all speaks to the pain ahead that the Federal Reserve continues to remind the public about whenever Powell speaks.

• Current Week: 15

• Previous Intermediate/Weekly Cycle Low: Week 16 (6/17/22)

• Current ICH: Week 9 (8/15)

The Long Term (3 Year) Cycle

Monday starts a new monthly and quarterly candle as we begin Q4. We now have 3 red down (lower low) quarterly candles in a row for the first time since the Global Financial Crisis between 2007 and 2009. In that time period we had 6 red down quarterly candles in a row. The last period where we saw anything remotely similar was after the 2000 bubble. In that case we did not have all red candles the whole way down so you can even argue it was more treacherous. We ended up with a massive quarterly down trend where there were a few green quarters sprinkled in the mix, all acting as lower highs that eventually led to lower lows. This context is crucial since we may get a similar move into the 3 year cycle low so it’s important not to get sucked into a rally that will end as a lower high and lead to lower lows.

The other thing I would note is we’re still hovering above the 50 month moving average. Just as we will likely fall meaningfully below the 200 week moving average, I would expect the same thing for the 50 month moving average. This is not because moving averages hold any kind of special power. It’s really just a matter of math. If something is in a downtrend for a long enough time there is no way for it to remain above a long term moving average.

• Current Month: 30

• Current Long Term Cycle High (LTH): Month 22 (Jan. 2022)

• Approximate Cycle Low Timing: March 2023

Conclusion

The market has been bearish since January and hopefully you have been following my content since then especially on YouTube for in-depth educational videos and Twitter for timely updates as markets move in real-time. A long term cycle decline has been underway since that fateful swing high in early January for SPX and actually November for the Nasdaq and crypto markets. We need to patiently wait for this weekly cycle to play out and the one after it but eventually, there will be a massive buying opportunity across many asset classes and I will be here to help navigate the details.

TL;DR

We had our 3rd red week in a row as the weekly cycle decline continues. We knew we were in the declining phase of the cycle since the update on the last week of August when we formed the weekly swing high after the Jackson Hole speech. Keep in mind we’re also declining into a 3 year cycle low so even after we get our low for this weekly cycle we would expect at least one more left translated and failed weekly cycle which would take us into early 2023.

The Daily Cycle

Friday was day 18 of the daily cycle and the daily cycle high was on day 4. That is an extremely left translated cycle as it’s rare that we get a DCH so early. This is another example of the importance of being nimble and following the price action. I get questions on Twitter about cycle counts and what the usual timing bands are. This is a misperception people have. In reality, price will always do whatever it wants and its our job to analyze. This means sometimes you get an extremely early DCH and you have to just roll with it. The same is true about our coming DCL. Since we’re already at 18 days, we could get a DCL at any point now. The key is to wait for a swing low and then observe how it follows through (or fails to do so) on the higher time frames.

In terms of immediate expectations, we had a very short term bounce on Sept 27 which has served as our lower high. We should get another bounce within the next few days but it’s impossible to know how long it will last. The fact that the Sept 27 rally failed the very next day is telling us the market is very weak so we may not be able to string together a multi-day rally for the next few weeks. This is a scenario to prepare for where the best we get are one day rallies that get sold off the next day.

The jobs report on Oct 07 will be one of the next big catalysts. We’re at a point where the market will latch on to any economic data available as people grow more concerned that the Fed will commit a policy error. Even more significant is the next CPI release which will happen on Oct 13 at 8:30am. The last release was literally the start of this current trend leg lower as we gapped down and never looked back.

This takes us to our weekly chart structure where we may see something similar with 3 weeks down and at best 1 week up before another leg lower.

• Current Count: Day 18

• Previous Daily Cycle Low: Day 54 (9/6/22)

• Current DCH: Day 4 (Sept 12)

The Weekly Cycle

This past week was week 15 and we closed as another down week and making fresh lows for the year as other indices and sectors had already confirmed. As discussed in this video, we should expect downside through the rest of the year at the very least though a violent short covering rally may be just around the corner. What’s needed is some kind of catalyst but the good news is we will see that in the charts in real-time.

Since we know the daily cycle is declining and the weekly cycle has been declining since week 9 it puts us in an awkward position where structurally we need a bounce to keep the trend of lower lows and lower highs going. This is a critical thing to understand especially for anyone inclined to be aggressive and try to short. Prices trend so there will always be counter trend moves while price is moving to its final destination. In this case that destination is lower but we have to expect small rallies along the way that can actually be used as selling opportunities.

The other important thing to note is the 200 week moving average. As I called out in a tweet, during the Global Financial Crisis, SPX dropped more than 50% below its 200 week moving average. Consider the fact that we are just now flirting with the 200 week moving average. An indication we may be relatively early in the decline which sounds crazy since we’ve been in a downtrend since the beginning of 2022.

I’m not implying we will fall 50% below the 200 WMA again but you have to imagine we will at least get meaningfully below it and may stay there for at least a few months. This all speaks to the pain ahead that the Federal Reserve continues to remind the public about whenever Powell speaks.

• Current Week: 15

• Previous Intermediate/Weekly Cycle Low: Week 16 (6/17/22)

• Current ICH: Week 9 (8/15)

The Long Term (3 Year) Cycle

Monday starts a new monthly and quarterly candle as we begin Q4. We now have 3 red down (lower low) quarterly candles in a row for the first time since the Global Financial Crisis between 2007 and 2009. In that time period we had 6 red down quarterly candles in a row. The last period where we saw anything remotely similar was after the 2000 bubble. In that case we did not have all red candles the whole way down so you can even argue it was more treacherous. We ended up with a massive quarterly down trend where there were a few green quarters sprinkled in the mix, all acting as lower highs that eventually led to lower lows. This context is crucial since we may get a similar move into the 3 year cycle low so it’s important not to get sucked into a rally that will end as a lower high and lead to lower lows.

The other thing I would note is we’re still hovering above the 50 month moving average. Just as we will likely fall meaningfully below the 200 week moving average, I would expect the same thing for the 50 month moving average. This is not because moving averages hold any kind of special power. It’s really just a matter of math. If something is in a downtrend for a long enough time there is no way for it to remain above a long term moving average.

• Current Month: 30

• Current Long Term Cycle High (LTH): Month 22 (Jan. 2022)

• Approximate Cycle Low Timing: March 2023

Conclusion

The market has been bearish since January and hopefully you have been following my content since then especially on YouTube for in-depth educational videos and Twitter for timely updates as markets move in real-time. A long term cycle decline has been underway since that fateful swing high in early January for SPX and actually November for the Nasdaq and crypto markets. We need to patiently wait for this weekly cycle to play out and the one after it but eventually, there will be a massive buying opportunity across many asset classes and I will be here to help navigate the details.