TL;DR

We are early in the advancing phase of a new weekly cycle. Monday (Oct 31) will be the start of week 3. Anything can happen with the FOMC meeting looming on Wednesday so we should expect chop early in the week and a big volatile move to end the week once the FOMC announcement is out of the way.

The Daily Cycle

Friday (Oct 28) was day 11 of the daily cycle and given the move it created on the weekly chart it confirmed we are in a new weekly cycle which means Monday (Oct 31) will be day 12 of the daily cycle and the start of week 3. Next week is also the FOMC announcement on Nov 2 where the market is expecting a 75 basis point rate hike. As discussed in this detailed video, we are at a critical juncture where one of two extremes will play out. We will either form a bearish swing high as a result of the FOMC announcement and resume the downtrend, or we continue the daily and weekly cycle advance and probably try to close the gap pictured in the chart below

In terms of understanding the price action, notice we broke out above the 3800 area marked by the line in the chart below. We then backtested it on Thursday. In fact, notice that Thursday actually made a lower low by going below the low from Wednesday and even closing below it. In real time that was a very bearish signal since it created a daily swing high which could have been the daily cycle high. Especially with many not believing in the rally, it was easy to get bearish with that close. The following day we had a massive reversal. We didn’t make a lower low so it wasn’t a bullish outside candle technically speaking but if you think of the Thursday and Friday candles combined, that becomes a bullish outside candle of the previous 2 days. All that to say, this was a false breakdown set up. A very common pattern especially if you’re always looking across multiple time frames simultaneously. This is the kind of price action pattern that occurs on all time frames and often marks a “bottom” on that time frame. Next we move on the weekly chart/cycle.

• Current Count: Day 11

• Previous Daily Cycle Low: Day 27 (10/13/22)

• Current DCH: TBD

The Weekly Cycle

Last week we had reason to believe week 17 was the ICL and with the follow through this week we can confirm that was indeed the case and we just completed week 2 of the weekly cycle. It’s very important to understand that any weekly cycle can have a very early ICH so just because it’s early in a weekly cycle doesn’t mean there will be a rally for many weeks. Keep in mind one of the previous weekly cycles for NDX topped out on week 2. This means we could easily make another new high this coming week and that could end up being the ICH at week 3. We know the FOMC announcement is coming up on Nov 2 so this is a classic set up for a daily cycle high that also turns into the ICH as we being the weekly cycle decline.

In that sense this week will be very binary since we either get the start of the weekly cycle decline or we continue the weekly cycle advance. Another way to think about it is we are on the cusp of another trending move on the weekly chart and people that know how to analyze price action will be able to get in early as the trend begins to unfold. Specific levels are discussed in detail in this video.

• Current Week: 1

• Previous Intermediate/Weekly Cycle Low: Week 17 (10/13/22)

• Current ICH: TBD

The Long Term (3 Year) Cycle

We have just one trading day left before the October candle closes and the set up is definitely bullish. Given the position of the candle it sets us up for a relatively easy monthly swing low if price gets bullish follow through as the November candle opens on Tuesday. It will really come down to how things play out on the lower time frames within the daily cycle especially as we have the FOMC announcement which is sure to cause a ton of volatility. We also know other important indices are sending signals that should be bullish for SPX like the US Dollar Index (DXY) which is undergoing its weekly cycle decline.

We know we are only on day 11 of a new daily cycle and will be starting week 3 of a new weekly cycle. That gives the market plenty of time to rally theoretically but given we are in a massive downtrend on higher time frames, it’s important to be cautious especially ahead of the FOMC announcement. This will be the real pivot point. As mentioned above, the big risk is we begin the weekly cycle decline this coming week after the FOMC announcement and if that’s the case it means a very left translated weekly cycle which would confirm we are continuing the 3 year cycle decline.

The stakes this week couldn’t be bigger as there are very big implications for any signs of the daily cycle beginning to roll over. To be clear, if we start the daily cycle decline this week that implies we’re starting the weekly cycle decline which in turn means we are still declining into a 3 year cycle low. This means the downtrend on the monthly chart would continue and we could expect another lower low on the monthly chart. Likely something in the low 3000 range based on the structure of the chart. There will be a huge buying opportunity for indices and individual stocks as well like Amazon as poignant example.

• Current Month: 31

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

• Approximate Cycle Low Timing: March 2023

Conclusion

Next week is make or break for the rest of 2022 and early 2023 as we get past the FOMC rate hike announcement and begin the November candle. This is critical data we will be watching closely to understand how long this downtrend may persist and when it’s safe to buy for a long term rally.