Cycle Trading

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Stocks delivered a solid recovery today regaining both the 50 day MA and the 10 day MA. But the Selling on Strength numbers suggest that we are not out of the woods.

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The daily cycle peaked on day 8 and then proceeded to sell off. Stocks lost the 10 day MA last Thursday, the 50 day MA on Monday and delivered more bearish follow through on Tuesday — potentially printing an early half cycle low. Stocks recovered on both Wednesday and Thursday but printed large SOS numbers.

The large SOS numbers printed Wednesday and Thursday continues a trend that I have noticed since this intermediate cycle began in October. We may still break to new highs during this daily cycle, but I think that the SOS numbers will continue to add up. So far this intermediate cycle has totaled a mind boggling 10.04 Billion SOS.

To put this in perspective let’s look at the SOS numbers prior to the March 2009 Financial Crisis low.

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The SOS numbers leading into the 2009 Financial Crisis low were more than double the typical SOS numbers that we witness during an intermediate cycle. So far this intermediate cycle is almost double the largest SOS number printed prior to the 3/2009 low.

The accumulated SOS for this intermediate cycle is unprecedented and I feel that it is foreshadowing a big correction.