This could be a big one

April 17, 2017 10:00 AM

As mentioned on the opposing page, the Dow Jones Industrial Average appears to be setting a long-term peak. Our weekly CPO indicates an extended downturn beginning in March and extending through the end of the summer before bottoming out in September. 

However, a longer-term and much deeper downturn is indicated on the monthly chart (see “Dow approaching top”). As you can see in the first monthly CPO chart, which was created shortly after the August 2015 correction, the CPO was already anticipating a major Dow top to occur followed by a cyclical downturn in the first half of 2017. The CPO showed the Dow rallying into 2017. 

The up-to-date monthly CPO chart shows the top occurring in Q2 2017, possibly into July, but followed by a major downturn expected to last well into 2019 before turning back up. This is as dramatic as a long-term projection as the CPO has shown for more than a decade. 

Why you should listen

Back in 2007 the CPO had projected that the Dow would experience a major downturn in 2008 and bottom sometime in 2009 (see “Will history repeat?”). Given the long-term metrics, the CPO was extremely accurate in projecting the credit crisis sell-off and the March 2009 bottom of the market. Here’s the kicker: The slope and metrics of the current CPO forecast are more extreme than what was indicated back in 2007. In other words, the CPO is indicating that the projected 2017 downturn will be more severe and last longer than what the Dow experienced in 2008.

About the Author

John Rawlins is a former member of the CBOT with more than 30 years of experience in trading and research. He co-developed the Cycle Projection Oscillator, which has been featured in Futures and numerous research reports, with an aerospace engineer to identify the dominant cycles in a data stream and project them into the future. Reach John at johnrawlins@msn.com. @cpopro1. You can reach John at johnrawlins@msn.com.