Cycle Trading

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The daily equity cycle peaked on day 8. It printed a half cycle low on day 21. Stocks printed a bullish reversal on Monday, which suggested a daily cycle low had been printed. The bullish follow through today makes this day 1 of a new daily cycle.

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Stocks closed right at the highs of the day, testing the declining cycle trend line. This trend line has marked resistance for the intermediate cycle decline. The question is would a break above this trend line signal a new intermediate cycle.

There are 2 issues here, timing band and confirmation of the intermediate cycle decline.

If day 31 did mark not only a daily cycle low, but the intermediate low that would place the weekly count at week 16. About 18% of intermediate cycles print an cycle low at 16 weeks or less. So from a timing stand point, it is possible. However, a failed daily cycle is the hallmark of an intermediate cycle decline. Since we have not had a failed daily cycle then I think that this simply extends the current intermediate cycle.

Bonds delivered some bearish follow through to the swing high that formed yesterday.

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The daily bond cycle peaked on Friday, day 6. A swing high formed on Monday and Tuesday delivered a clear and convincing trend line break signaling a daily cycle decline.

This is week 20 for the intermediate bond cycle. Bonds are in their timing band to seek out an intermediate cycle low. A failed daily cycle will confirm the intermediate cycle decline. A break below 132.01 forms a failed daily cycle, confirming the intermediate cycle decline.