Cycle Trading

Lately stocks and bonds have been seesawing.

When bonds are up, stocks are down. When stocks are up, bonds are down.

The daily bond cycle peaked on Friday, day 16. A swing high formed on Monday and a trend line break occurred today confirming a decline into a daily cycle low.

With this being the fourth daily cycle for the current intermediate bond cycle we need to be alert to bonds entering into their intermediate cycle decline. The true strength indicator was still making higher highs going into the third daily cycle. But has now formed a lower high, which is a signal for an intermediate decline.

The weekly bond cycle shows a week 16 peak. A break below 109.61 forms a weekly swing high and then a break of the weekly trend line will confirm the intermediate cycle decline.

Meanwhile stocks are on day 11 of the daily equity cycle. Following a right translated daily cycle we expect to see stocks break out to a new higher high. But since the April swing high stocks have been contained by the declining trend line.

And while stocks have been contained by the trend line off the April swing high, a bearish divergence has been unfolding since December on the weekly TSI which signals an intermediate cycle decline.

If stocks manage to break above the declining daily trend line and break above the April swing high, that would shift the peak out from week 8 to week 12 (or later). Which would change this from forming as a left translated weekly cycle to a right translated weekly cycle.

So if bonds are declining into an intermediate cycle low that should help to lift stocks higher. If that happens then that would certainly table a yearly equity cycle decline for the time being.