Cycle Trading

The yearly equity cycle is normally comprised of 2 to 3 intermediate cycles.

Stocks currently are in the third intermediate cycle of the year. The intermediate equity cycle normally runs 18 – 22 weeks from trough to trough. So at twenty weeks, stocks are in the timing band to seek out an intermediate cycle low.

The daily equity cycle is showing more bearish signals.

Stocks currently have a peak on day 15 with today being day 22. There is already a bearish crossover on the True Strength Indicator, which does a pretty good job of spotting tops. There is also a bearish divergence developing on the Money Flow Index, as well as the TSI.

The SPY also printed another large Selling on Strength number today.

The SPY printed a 118 million Selling on Strength today. Coupled that with the 220 million SOS from last Wednesday and that adds up to close to 350 SOS in a week. This is beginning to look like the type of SOS numbers we see near a cycle top. While not a precise timing tool, caution is warranted.

I want to share one more chart.

The $NYHL also does a nice job helping to spot equity tops. Currently the $NYHL is showing a bearish divergence.

It seems that pretty soon risk will start to out weigh reward …