Cycle Trading

Stocks printed an intermediate cycle low on July 7th. After peaking on Monday, day 9, stocks dropped for 5 straight days before finding support at the 200 day MA.

We discussed over the weekend how this is the first daily cycle of a new intermediate cycle. And typically the first daily cycle forms as a right translated cycle. So it appears that stocks have left behind a half cycle low. Now we should see stocks break out to new highs which will lock in a right translated nature to this daily cycle.

It is interesting to note how stocks making new highs began to recover today while stocks making new lows dropped dramatically.

Bonds have also emerged from an intermediate cycle low. Bonds printed an intermediate cycle low late June. Once again we need to keep in mind that the first daily cycle typically forms as a right translated cycle. And with Monday’s peak at day 20, bonds have assured us of a right translated nature to this daily cycle.

But bonds have formed a swing high today. Bonds are in their timing band to seek out a daily cycle low. A close below the upper cycle band signals a daily cycle decline. We should see bounds then break below the daily cycle trend line before the daily cycle low is set. Then our expectation for the new daily cycle will be to go on to print new highs.