Stocks On The Brink Of A Sharp Correction [Dow Jones Industrial Average, Direxion Daily Small Cap Bear 3X Shares]

down plunging pricesToby Connor:┬áIn today’s post I’m going to make the case for stocks moving down into a sharp correction over the next 4 weeks.

To begin we need to examine the last two intermediate cycles. Normally an intermediate cycle will run roughly 22 weeks.

Well in our case the last two cycles were both stretched to 32 weeks by the Fed’s QE3 programs.

As you can see in the next chart both intermediate cycles had 4 smaller daily cycles embedded within them.

This is pretty unusual as most intermediate cycles only have 2 or 3 daily cycles nested within.

The market is now in desperate need of a short cycle to balance out these two long cycles.

Next let’s examine the larger yearly cycle. As you can see out of the last 4 years, the larger yearly cycle bottom has occurred in the summer 3 times.

The odds are favorable that the 2014 yearly cycle low should also occur in the middle of summer.

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