Darkest Before the Dawn …

October 23, 2012

Stocks plunged today dropping 1.44%

Tuesday we saw stocks continue to accelerate into what I presume to be an intermediate cycle low.
At 35 days stocks have entered the timing band to print a daily cycle low.
Breaking below 1396 forms a failed daily cycle, which would be the last check on the list for intermediate cycle corrections.

I believe that stocks still have a chance of taking out the 1396 level.

If we do not see 1396 taken out, I would still label this an intermediate cycle low for the following three reasons:

1) The weekly equity cycle peaked on week 14 and has since sold off forming a weekly swing high and breaking below the intermediate cycle trend line.
2) Intermediate cycle corrections typically run 5 – 7 weeks and so far we have sold off for 6 weeks.
3) At 20 weeks, the current cycle is right in the heart of the timing band for printing an intermediate cycle low

While we have not yet seen any significant buying on weakness days signaling the Big Boys are placing their bets and a bottom is near, there is a bullish signal coming from the transports.

Despite stocks rolling over into an intermediate cycle decline we see the Bullish Percentage Index have a clear and convincing trend line break.

And today while stocks were down big …

The Transports were up on Tuesday showing a bullish divergence over equities.

While that is promising equities will likely not find a bottom until the dollar rally tops.

Tuesday saw the dollar break through the intermediate declining trend line.
The 80 level managed to halt the dollar for now.
Since the dollar is still relatively early in its daily cycle, I think that we should see the dollar break through the 80 level and also break above the 80.42 level, which would finally form a weekly swing low which gives final confirmation to the new intermediate cycle.
Then I would be on the look out for a daily swing high on the dollar accompanied by some buying on weakness numbers on the SPY.

Pardon me as I go warm up the truck …

9 responses to “Darkest Before the Dawn …”

Chris

October 23, 2012

Thanks LM, I don’t think that trucks going to have to sit idle for to long.

Reply
bernard tan

October 24, 2012

i am new here when there is a trend line break for the dollar , doesnt that signal an uptrend for the dollar , or it signals that the dollar is ready to resume its downtrend?

Reply
1. likesmoneystudies
  
  October 24, 2012
  
  btan98,
  
  Welcome aboard, glad that you are here.
  A declining trend line break usually confirms of a new cycle
  A rising trend line break usually confirms a decline into a cycle low.
  
  Reply
jon

October 24, 2012

if you would like a few more hits, why not ask tim knight at slope of hope if he would allow you to post on that site or his alternate site “social trade”..

enjoy the blog…

Reply
1. likesmoneystudies
  
  October 24, 2012
  
  I’ll have to give that some thought.
  
  When Bob Loves Hawaii , Hard Assets for Eternal Value, mentioned my blog when he posted on there I did see a jump in hits.
  
  Reply
Riser

October 24, 2012

Warm up the truck to say the least man………..ive closed the last of my short positions and am more thna gonna load the boat here currency wise – as well as gold.

These turns dont come often – and this one is set up for some big big gains.

Reply
R.Goodnight

October 24, 2012

For anyone who cares to comment:
When looking to buy and signals are within timing band of expected move, do you scale in?
Do you place bid(s) at whatever your particular price target(s) may be and hope they execute?
Do you use other indicators to set your buy price targets?
It seems with such volatility (big daily swings) one must do some/all of the above unless you have the luxury of watching the markets all day.
TIA for any feedback/suggestions.

Reply
vorfahrt

October 24, 2012

Thanks, LM! Yes, ideally we need to fall below the 1396 low of the last cycle. I guess we may have to be more patient than today. If the US$ peaks before day 8, that gives us all of this week to find a low.

Reply
BAC: Cycle indicates a buy… | Wall Street Stocks

October 27, 2012

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