Cycle Trading

Our expectation for this daily cycle is to form as a left translated cycle peaking on or before day 20.

Stocks peaked on day 8 and formed a swing high along with a bearish crossover on the True Strength Indicator the following day. While stocks can still pop higher, waring signals of a decline are mounting.

As I have annotated above, a fairly reliable indicator of a cycle decline occurs when the TSI crosses below the zero line. A zero line crossover usually results in the primary cycle decline. Monday the TSI was just above the zero line at 1.74. A bit more weakness should deliver a zero line crossover.

Stocks also formed a weekly swing high today. Stocks are very late in their timing band to decline into an intermediate cycle low. A swing high forming on week 28 is quite likely marking the intermediate cycle decline.

Another set of indicators that I watch is on the New York Advance/Decline chart.

I have noticed that a bearish crossover on the 70 line on the Ultimate Oscillator accompanied by a bearish crossover of the TSI is fairly reliable of spotting an equity cycle peak.

We will need to watch ourselves going forward …