Cycle Trading

It has been over one year since stocks printed a failed daily cycle.

The last time stocks printed a failed daily cycle was back in November, 2012. Stocks went on to print 7 straight daily cycles that formed a higher high and a higher low. Finally this 8th daily cycle stocks broke below the previous daily cycle low producing a failed daily cycle.

Stocks spent last week consolidating its initial move into its daily cycle decline. Today stocks broke below the previous daily cycle low in a clear and convincing manner. A failed daily cycle is the hallmark of an intermediate equity decline. Monday was day 30 and stocks just entered its timing band for a daily cycle low which is three week wide. As stocks decline we will now be on alert to a daily swing low accompanied by a declining trend line break to help spot the daily cycle low.

More confirmation of an intermediate equity decline arrived with the breach of the weekly cycle trend line. The yearly cycle is over-due for a yearly cycle decline. A failed intermediate cycle is the requirement for a yearly cycle decline. Which means that stocks will need to break below the 1560 level set in June to confirm this is the yearly cycle decline.

I noted the October pivot at 1646.47. The October pivot occurred at 15 weeks and has the look of an intermediate decline. Since there was no failed daily cycle I elected to not label it an intermediate low. If the intermediate equity decline breaches this level, but not the 1560 level, then we may need to reevaluate our intermediate cycle labeling.

Gold’s daily cycle peaked last week on day 17. The brief three day decline saw gold break below its daily cycle trend line but found support at the 50 MA. A break above the declining (dashed) trend line will signal a new daily cycle. A break above the day 17 high of 1278.60 will confirm a new daily cycle, with gold setting a higher low.

If day 20 winds up as the daily cycle low I would view this as a very bullish development for gold. Gold has been crawling along the 50 MA for the past three weeks. A crawling pattern is usually a continuation pattern.

So a break to new highs will signal a golden opportunity.