The expected autumn weakness is in progress. The question remains as to when the markets will rebound. The October 12-13 time period is a projected turning point, likely a low. October 27th has been the annual low in any year. And, the last week in this month brings a low in the composite cycle composed of the one-, four-, and ten-year cycles. The DJIA has tended to rally in Q4 even in pre-election year and in years ending in three. So, we face one to three more weeks of decline.
These observations apply to a ‘normal’ market. This may not hold if this is the beginning of a 1970s-style bear market. There are certainly many similarities such as increasing rates, high commodity prices, and similar politics. There is one other cycle that supports the former and more bullish view. That is the reliable tendency for the market to rally for 15 months after the mid-term elections. This effect would carry the indices through to the end of this year.
If a low is due next week, stock selection is difficult. Short sales may only apply to the next one or two weeks. The longer-term view favors the bulls. Here are a pair of weak stocks that can be shorted over the near term.
Over the next week, Avalon Bay Communities is likely to decline. In addition to the overall market weakness, the real estate sector is currently the weakest due to rising rates. The weekly and the monthly cycles are still falling over the next week. From October 19th to November 9th, the shares have fallen 65% of the time. The stock could retreat to $155 by that time.
Avalon Bay Weekly Cycle
Monster Beverage is likely to fall further. October has been the weakest month for these shares. The stock has fallen 58% of the time for an average loss of 3.2%. The weekly cycle is falling. Relative strength is at new lows but the stock remains at a very overbought monthly level. There is much room to fall. The weekly momentum is failing. The stock is likely to reach $45-$48.
Monster Beverage Weekly Cycle
Monster Beverage Daily, Weekly, Monthly
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