Lock, Stock and Barrel

“Markets can get volatile around this time of year. The Russell 2000 index peaked on November 8, 2021 and declined 14% to December 20, 2021.

Next Tuesday, November 22, is the one-year anniversary of the top in The NASDAQ indexes and the start of the bear market. As recently as 2018, the DJIA rallied strongly from November 23 to December 3 and then plunged more than 16% to December 26, 2018.  In 2015, the DJIA made a November high and declined 14% into mid-January. And in 2002, the DJIA made a countertrend rally high on December 2, 2002, and declined 18% to March 2003. There is a positive seasonal bias into the first few days of December but that dissipates thereafter.” Elliott Wave Int.

Last week we wrote a report Gann Vs Elliott.

Gann swing charts suggest higher while the Elliott Wave patterns make a compelling case for an important eminent top from current levels

VIX and UVXY have never gotten off the mat this fall but now volatility is at levels from which massive spikes erupt about every two years.

The last one was the Covid Crash of 2020 which saw UVXY explode 13 X.

Remember that November 2022 is 49 months from the start of a waterfall decline in October 2018.

November also ties to the number of months from the 1842 low to the 1932 low and from the 1932 low to NOW.

So a low of some degree for a countertrend rally is due, but, usually, these Intermediate Waves end with a bang, not a whimper.

If a rally does not get traction soon, then money managers may unload, lock, stock, and barrel going into year-end with Santa MIA.

This makes the December 16^th options expiration very interesting.

Below is a QQQ daily with the year-to-date Fear & Greed top signals.

The following chart shows a year-to-date SPX Oscillator signal.

The oscillator peaked in early November. It has a long way to drop before the market can be near a bottom.

The top panel of the above chart shows the % of stocks above their 200-day moving averages at peaks in the last year.

Note the internal weakening throughout the year is potentially a precursor to a give-up stage at year- end.

Mr. Market seems loaded for bear.