Cycle Trading

Stocks

I want to review last week’s weekly equity chart.

We see a trend line break followed by a swing low, which usually herald’s a new intermediate equity cycle.

Now let’s fast forward to this week.

The weekly chart is threatening to reverse its swing low.
This is not the typical behavior for equities exiting an intermediate cycle low.

To compare, let’s look at some recent intermediate cycle rallies:

Rallies out of intermediate cycle lows tend to be dramatic events.
The average rally out of an intermediate cycle low is 6-10% in the first 8-13 days.

Clearly that is not happening.

Unless equities get a reversal and begin to rally we need to consider that:
Either the intermediate cycle topped on week 3
Or
We just completed week 30 and the intermediate cycle low is still out in front of us.

The equity daily cycle also has some different ways to look at it.

One scenario has the daily cycle equity count at day 18 and threatening a failed daily cycle.

A second scenario has equities at day 42.

Should Ben Bernanke be able to halt the dollar, then I think a day 42 read would be correct. If the dollar rolled over, that should ignite an equity rally.

If Ben fails to stop the dollar rally, then at day 18 view allows stocks more time to drop in response to a dollar rally.

The yearly cycle stands at month 7.

The monthly chart is working on the second consecutive red candle.
Only one time in the last 15 years did 2 consecutive monthly candles not lead into a yearly cycle low.

Equities seem to be right on the precipice.

I just wonder if Ben is just going to sit back and let the markets play out or not.

I plan to make one more installment on the weekend report on Sunday.