Cycle Trading

Stocks were taking it on the chin today. This forces us to re-look at our daily cycle count.

Last Wednesday was day 39 for the daily equity cycle and stocks printed what looks to be a daily cycle low. Two days later stocks printed a bullish reversal that clearly breaks the developing declining trend line. A trend line break occurring in the timing band for a low signals a new daily cycle.

If day 39 is the daily cycle low, that means that stocks just printed a right translated 39 day daily cycle. Therefore cycle theory is looking of this new daily cycle to make a new, higher daily cycle high. But today’s action saw stocks come to within just over one point of the day 39 low.

Stocks are currently caught between the day 36 cycle peak of 1813.55 and the day 39 low if 1779.07. If stocks break lower, that does not mean a failed daily cycle. Since a new daily high did not print, a break lower signals a continuation into a daily cycle low. Should that occur, that would make Wednesday day 44. Any break lower would be short lived because stocks are now on the outer limits of their normal timing band of for a daily cycle low.

Further evidence that a break lower is a continuation of the daily cycle decline comes for the Russell.

Today the Russell did break below the day 39 low. This extends the current daily cycle to day 44. So I would look for stocks to make one more push lower before setting a final daily cycle low.