Examining the Possibilities

March 16, 2015

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 …

2 responses to “Examining the Possibilities”

Bruno Cueto (@bcuetosalmona)

March 16, 2015

LM

Is it normal to see SoS that high as of today ate the beginning of a ne DC?

Br

Reply
1. likesmoneystudies
  
  March 17, 2015
  
  Bruno,
  
  Possible — yes. Normal — no. That large SOS could also signal that stocks are still in their daily cycle decline and this is a countertrend bounce. While it looks like an early daily cycle low formed last Wednesday, we still need confirmation. If Wednesday was a daily cycle low then that was a right translated cycle. Therefore this new cycle should go on to print a higher daily cycle high. A break to new highs then gives us final confirmation this as a new daily cycle.
  
  And we do not to look any further back than the last daily cycle. Notice the shaded area. That daily cycle peaked on day 8 and then chopped around for the next 4 weeks. Something similar could set up now.
  
  LM
  
  Reply

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