Cycle Trading

The previous daily cycle formed as a right translated daily cycle. Last week saw stocks break out to new highs, fulfilling our cyclical expectations. However, stocks ended the week on a bearish note.

The bearish reversal on Friday broke below the previous daily cycle high in a clear and convincing fashion. Stocks also printed a bearish TSI crossover. Now we are watching for either the TSI to break below the zero line or for stocks to break below the previous daily cycle low of 1842.11. Either event will signal that stocks have entered their daily cycle decline.

The NASDAQ had both occur on Friday.

While the S&P dropped 1.25% the NAS tanked for a whopping 2.6%. In the process the NAS delivered a bearish TSI zero line crossover and printed a failed daily cycle. It appears that the NAS is leading the way lower.

The NAS for the week was only down 0.67%. However the NAS had a bearish TSI zero line crossover last week. The last time the NAS had a bearish TSI zero line crossover on the weekly chart was well over a year ago. And when it happened the NAS lost over 12%.

So far the weekly S&P is holding up printing another higher high last week. However there is a bearish divergence that has been developing on the weekly TSI.

And as shown below, these bearish divergences on the weekly chart normally precede a correction.

Makes me wonder if stocks are about to go over the edge …