We can now say with a fair amount of confidence that all three of our broad stock market indices (DOW, S&P 500, NASDAQ) have started new medium-term cycles recently and are therefore relatively "young" cycles. The DOW and S&P 500 cycles started with their lows on either Jan. 24 or Feb. 24. The NASDAQ's new medium-term cycle likely started with last week's low On March 14 (a double-bottom to it's low on Feb. 24). The big question now is whether these new cycles will be bullish or bearish.
Cycles are always bullish in their early stage (as these are right now), but they can peak early and turn bearish very quickly if market forces are unfavorable. All three indices are now rising sharply into our current reversal zone (March 15 - 24), so this sets up the potential for a top and significant correction to follow. If market forces are strongly bullish, however, sometimes a reversal zone will coincide with a "breakout" instead of a reversal down. If these indices move higher after Thursday and into next week, we will have to assume that is happening. Even if the market does turn down now, any correction would have to break below those Feb. 24 lows to turn the new cycles bearish. (Those lows would be 32,272 in the DOW, 4,116 in the S&P 500, and last week's 12,555 low in the NASDAQ - a double-bottom to its 12,598 low on Feb. 24). If those lows hold, we will likely see more rallying, and these indices could then test and challenge their all-time highs.
As I've stated before, if ALL THREE of these indices can break clearly above their all-time highs (that would be the Nov. 2021 high of 16,212 in the NASDAQ, and the Jan. 2022 highs of 36,952 and 4,818 in the DOW and S&P 500, respectively), then it's possible for equity markets to avert a severe correction or "crash" over the next few years. But if this market starts to turn down now, or if it rallies over the next several weeks to challenge but not exceed the all-time highs (or exhibits bearish divergence with one, two, BUT NOT ALL THREE indices making a new all-time high), then we would likely be on track for a VERY severe correction over the next several years. We are at a turning point right now where the market can turn either very bullish or very bearish. Needless to say, we need to watch this market carefully over the next month or two. I am currently favoring the bearish view, but that could change. If the conflict between Russia and Ukraine can be resolved quickly, that could trigger a major rally on Wall Street. If the conflict continues or escalates, equity markets could panic and experience a severe sell-off. We will have to wait and see how this plays out.
One market that has already been very strongly affected by the Russia/Ukraine war is crude oil. Indeed, the price of crude went "parabolic" this month as the war escalated, with the price jumping from $90 to over $126 in the first week of March. From there it fell back quickly to around $95, but it is now rising sharply again and closed today around $110. This type of volatile roller coaster ride is one reason we are staying on the sidelines of crude right now - the "wildcard" factor of Russia/Ukraine is distorting our normal technical analysis and parameter boundaries. Despite this distortion, however, it's still possible to identify the timing of our cycles, and this may pinpoint significant highs and lows to buy or sell. Right now, crude's medium-term cycle is getting "long in the tooth" (old) which means the final cycle top is due and may have already happened with that $126 high two weeks ago. We are seeing another rally now that could challenge that high before prices turn down and fall to the final medium-term cycle bottom due anytime now over the next 6-7 weeks. Any rally that stalls out could be an opportunity to sell short, but it might be safer to wait for the final cycle bottom and then buy. The longer-term cycles in crude still look quite bullish, so any significant correction over the next month or two could be a buying opportunity. We will stay on the sidelines of crude for now.