Cycle Trading

Stocks continued lower today, breaching the intermediate cycle trend line. Stocks ended up recovering a bit and closed above the intermediate trend line. This presents us with some different possibilities.

As we discussed last night, it appears as if stocks left behind a 26 day, daily cycle low. Therefore we could see a bounce here before stocks continue lower into a left translated daily cycle decline.

There is another possibility. Instead of day 26 being an early daily cycle low, it was a half-cycle low. That would make the reversal that printed today be day 37, placing stocks in the heart of its timing band for a daily cycle low. The 913 million BOW that printed over the past three days supports this scenario.

If today is day 37, then a daily cycle low should print any day now. And with stocks now at week 23 of its weekly cycle, that would virtually assure us of a left translated formation to the new daily cycle.

Bonds reversed lower on Wednesday and delivered more bearish follow through today.
The peak on day 13 shifts the odds for this daily cycle forming as a right translated cycle. But with Thursday being day 14, bonds are still 4 days shy of their timing band to print a daily cycle low. Bonds will need to avoid breaking below the previous low of 122.97 to maintain a bullish outlook.