Cycle Trading

Stocks closed above their declining cycle trend line today.

In real time, day 43 did look like a daily cycle low. Then stocks printed a lower low last Thursday. Today’s break of the declining trend line signals that Thursday hosted a daily cycle low. Thursday would have been day 17, which is too early to host a daily cycle low. Therefore we will view that Thursday’s lower low stretched the daily cycle out to day 60.

Today’s rally has also formed a weekly swing low (not shown). Last week was week 24 for the intermediate equity cycle. So, the weekly swing low that formed today may also signal a new intermediate cycle.

Meanwhile bonds appear to be have begun their daily cycle decline.

Bonds printed an exhaustion candle on Thursday, then formed a swing high on Friday. Thursday was day 29, which places bonds late in their timing band to begin their daily cycle decline. Bonds need to break below the daily cycle trend line in order to confirm the daily cycle decline. Since bonds are so late in their timing band for a daily cycle low, bonds are likely to deliver a brief decline before printing their daily cycle low.

But just as stocks appear to have begun a new intermediate cycle, I suspect that the intermediate bond cycle has topped. I plan to elaborate more on the intermediate cycle status of both stocks and bonds in Wednesday’s Mid-Week Update.