The Setup


Throughout the fall we wrote that our expectation was for the market to “get hit hard starting in January.”

That expectation was based on WD Gann’s Master Time Factor.

After an initial low and an interim rebound, the roadmap is that this same cycle should exert its downside pressure into sometime in May, which may represent a washout/capitulation phase of the first intermediate low in a bear market.

There are other cycles which suggest a possible plunge into May.

Last fall, we also wrote how January 2022 is 49 years from the January 1973 false breakout. That was the start of a brutal and persistent bear market.

7 squared, or 49, ties to the beginning of WD Gann’s “crash cycle…” be it days, weeks, months or years. For example, the waterfall declines in two of the greatest crashes in history, 1929 and 1987, started 49 days from the prior high in each instance.

The culmination of such waterfalls typically culminates in the 55 to 56 period.

Well, January 2022 also saw a false breakout mirroring the early January top in 1973.

So we had/have two major cycles exerting their downside pressure in January.

Let’s look at these two cycles in the context of the QQQ Glamour Index to see what price has to say as viewed through their weeklies.

The Q’s initially peaked in late August 2021, following which they pulled back to test a weekly trendline starting from the first correction low after the major March 2020 low. That correction low in October 2021 installed a 3 point rising trend line.

The first low points were the September/October 2020 bottoms.

The second low points were the March/May 2021 bottoms.

The aforesaid October 2021 low is point three of this support.

The Q’s carved out a Key Reversal Week on the week of November 22.

With a test of the reversal week taking place at the end of the year on the NR 7 Week (narrowest range in 7 weeks) of December 27 in league with the SPX ATH soon to follow on January 4, 2022.

The late year failed test of the QQQ ATH perpetuated the first turn down in the important 3 Week Chart at 369.30 on the week of January 17, 2022.

Unlike all the other turn downs in the 3 Week Chart since the March 2020 crash low, this turn down has exhibited a change of character as it did not define an interim low in the Q’s.

Instead, it lead to meaningfully lower lows in February, which were tested in March.

That double bottom at the 318/317 region perpetuated a rally phase during which the 3 Week Chart turned up the week of March 28… where a cluster of shorter term cycles nested.

As regular subscribers know, when the market or a stock is bearish, a turn up in the 3 Week Chart should define a high soon in terms of time and price. And, vice versa, when the market is bullish a turn down in the 3 Week Chart should define a low…soon.

The Q’s tailed off on the week of March 28, following through to the downside last week.

In fact, the high in late March (371.83) ties to the 369.30 level where the 3 Week Chart first turned down off the all-time high.

Here’s the setup:

If the first leg down ended in late February/early March, then the turn up of the 3 Week Chart in late March likely defined the high of a corrective rally.

If so, we are in the eye of a powerful 3rd wave down and April 5 knife down is like January 13, from which the SPX slid 720 points in SEVEN trading days.

This idea is underscored by the Q’s reversal from their weekly 50/20 moving average Bowtie last week.

Importantly, the 408.71 QQQ ATH points to/vibrates with the end of March/early April and the recent roll-over — in keeping with WD Gann’s Law of Vibration and the Principle of Squares.

Purple 409
Red 314
Green early April

As WD Gann proved, markets play out in 90 degree decrements of the circle/cycle.

360 degrees down from 409 is 333. Bearishly, the Q’s overshot that price cycle extending to 317.45, which is just shy of 450 degrees down at 314.

The indication is a full 540 degree drop is on the table.

Since the QQQ ATH was November 22, it puts the time frame around May 22 on the radar as that is 180 days/degrees from November 22.

This is underpinned by 90 days/degrees from November 22 tying to the February 24 major reversal low.

In other words, late May is 180 days/degrees from the November peak and 90 days/degrees from the late February low.

We have a possible High to Low to Low cycle on the table.

In sum, there is a time to be long, a time to be short, and a time to go golfing.

This is a time to be short and short rallies in most stocks in this bifurcated market.

Central Banks are telling us they want tighter financial conditions despite slower growth.

The Fed Put is kaput.

Are you listening?

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