Cycle Trading

Stocks formed a lower low on Wednesday but then reversed higher into the close.

By printing a lower low and then closing near the high of the day stocks have eased the parameters for forming a swing low. At 32 days, stocks are in the timing band for a daily cycle low. A break in the TSI trend line will signal a new daily cycle. If a daily cycle low is left behind today then I would expect to see one more failed daily cycle to this current weekly cycle.

While stocks eased the parameters for forming a daily cycle low, bonds formed a swing high on Wednesday.

Wednesday was day 26 for the daily bond cycle Bonds not only formed a swing high today but also delivered a clear and convincing trend break to confirm a daily cycle decline. Since it is late in the daily bond cycle I expect to see a brief decline. And the next swing low has a good likelihood of marking the daily cycle low.

The Miners peaked on day 21. The lowest point since then printed two days later. Over a week later the Miners have been trading in a tight range. However there is a bearish divergence developing on the True Strength Indicator. That suggests that the Miners will make one more push into a daily cycle low.

However if the Miners were to break above the declining trend line and print a higher high then we would be forced to recognize day 23 as the daily cycle low. One reason that supports a potential bullish break out is the dollar.

The dollar’s daily cycle peaked on day 5, formed a swing high and has since drifted lower. Now at day 8, the dollar is testing the daily cycle trend line. A break below the daily cycle trend line would confirm that the dollar has entered into its daily cycle decline. And with a 5 day peak, our expectation would be to see this form as a left translated, failed daily cycle.