Cycle Trading

Last night we discussed how stocks were forming a triangle consolidation sending price ricocheting along both the upper and lower stems. And since stocks are nearing their timing band week out a daily cycle low our expectation was to see a bearish resolution to the consolidation.

(Above is yesterday’s chart)

The daily cycle sports a day 9 peak making this a left translated cycle. Left translated cycles typically fail. So a break below 2044.02 forms a failed daily cycle, leading to an intermediate cycle decline.

Well stocks opened today by breaking below the lower stem and dropping close to 30 points.

Wednesday was day 26 for the daily equity cycle. While stocks dropped close to 30 points early on, they did find support at the 2052 level, a last line of defense.
Usually at day 26 stocks could go lower for another 2 to 4 weeks before printing a daily cycle low. However I have to think that the Fed intervened to prevent stocks from printing a failed daily cycle. I think that we will see that stocks are going to print a shortened 26 day, daily cycle low here.