Cycle Trading

Signs of a cycle top are beginning to appear beginning with the Selling on Strength print today.

The $220 million Selling on Strength is a the type of number that we will start to see as a cycle tops. Keep in my that this is not a precise timing tool. And if this is an intermediate cycle top I would expect to see several more SOS days like this.

Looking at the daily equity chart a bearish divergence is developing on the Money Flow Index as well as on the True Strength Indicator.

So far the daily equity cycle sports a day 15 peak with Wednesday being day 20. If day 15 remains as the cycle peak, then the odds are still good for this cycle to form as a left translated cycle. And then the possibility of an intermediate cycle decline is still in play.

If stocks do break to a new high, then we will likely see only a daily cycle decline.

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Bonds may have printed a daily cycle low today. Wednesday was day 15 for the daily bond cycle and we see that bonds have printed a narrow range day. A 15 day cycle is a bit early, but we did just witness a 14 day cycle back in August to September. A break above 105.27 forms a swing low.

The weekly bond cycle is only on week 11. That is too early for an intermediate cycle low to print. So if a new daily cycle does form here, it will likely form as a left translated cycle. A new, failed daily bond cycle will then take the intermediate cycle out to around 16 or 17 which is closer to the normal timing band for a weekly cycle low.