Cycle Trading

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The daily equity cycle peaked on Monday, which was day 39. A swing high formed on Tuesday with more bearish follow through today.

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Since stocks are in their timing band for a daily cycle low this swing high should send stocks into their daily cycle decline. A decline into a daily cycle low should see equities break below the daily cycle trend line. This daily cycle is forming as a right translated daily cycle, therefore our expectation is to see the next daily cycle form a higher daily cycle high. And with the intermediate cycle being on week 18, the next daily cycle should fail, leading into an intermediate cycle decline.

Stocks and bonds have been trading inversely so it is not surprising to see bonds forming a swing low today.

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Tuesday bonds printed their lowest point since the day 12 peak. That low found support at the 50 day MA. With bonds in the timing band for a daily cycle low today was quite likely day 1 of a new daily cycle. This cycle did not fail, but fail formed a right translated daily cycle. Here, our expectation is to see the next daily cycle form a higher daily cycle high.

So as stocks decline into a daily cycle low we should see bonds rally into a new daily cycle. And since we expect stocks to print one more daily cycle high before rolling over into an intermediate cycle decline, that rally will likely send bonds into their intermediate cycle decline.