Cycle Trading

Stocks printed a higher high on Tuesday.

Tuesday was day 27 for the daily equity cycle. Stocks are now 3 days shy of their timing band to seek out a daily cycle low. Therefore we need to be alert to a swing high that is accompanied with a trend line break, because that will likely lead to a decline into a daily cycle low. A peak on day 27, or thereafter, assures us of a right translated daily cycle formation. Therefore our cyclical expectation is to see this daily cycle print a higher low.

Stocks have been in a daily uptrend that has been characterized by closing above the upper daily cycle band. As long as stocks remain above the lower daily cycle band as they decline into the daily cycle low then they will remain in a daily uptrend.

XLE is also in its timing band to seek out a daily cycle low.

XLE peaked on Friday, which was day 25, as XLE tested the 200 day MA. A swing high formed on Monday. Now a break of the daily cycle trend line will confirm that XLE has begun its daily decline. Since XLE is getting late in its daily cycle cycle I do not expect a lengthy decline. A peak on day 25 has locked in a right translated daily cycle formation, therefore we expect to see XLE print a higher daily cycle low. XLE is in a new daily uptrend. It should remain in a daily uptrend until it closes below the lower daily cycle band.