Cycle Trading

The intermediate equity cycle peaked on week 19. A weekly swing high formed on week 20. With this week being week 22 stocks are in their timing band to seek out an intermediate cycle low. Stocks are behaving as if a daily cycle low formed last week. If stocks did form a daily cycle low last week, then we should see one more higher weekly high in this intermediate cycle before stocks roll over into an intermediate cycle decline.

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In order for stocks to experience an intermediate cycle decline, stocks will need to break below the intermediate trend line and also print a failed daily cycle. Failed daily cycles typically peak on or before day 20.

Stocks peaked on day 16 and printed its lowest point last Wednesday, day 26. If Wednesday hosted an early daily cycle low, then that daily cycle formed as a right translated cycle. Therefore a break out above the day 16 high provides final confirmation of the new daily cycle.

So if a new daily cycle is confirmed, at 22 weeks the odds are quite good to see this new daily cycle form in a left translated manner and fail, leading to an intermediate cycle decline.

There is also the possibility that stocks can reverse lower without making a new high. If that happens then that would likely extend the daily cycle past day 26. Should this happen then stocks would be at risk for breaking below the intermediate trend line signaling an intermediate cycle decline.

So in either scenario …