Cycle Trading

Stocks broke out to a new high on Tuesday. At 30 days, that locks in a right translated daily cycle formation. But despite printing a higher high, stocks closed lower on Tuesday setting up a potential counter trend move.

Tuesday was day 30 for the daily equity cycle, placing stocks in their timing band for seeking out a daily cycle low. The bearish close helps to ease the parameters for forming a daily swing high. A break below 2392.44 will form a daily swing high. Then a close below the 10 day MA will signal that the daily cycle is in decline. Stocks have established a daily uptrend. They will remain in their daily uptrend unless they close below the lower daily cycle band.

Bonds are also setting up for a counter trend move.

Bonds printed a bullish reversal off the support from the 50 day MA. Tuesday was day 40 for the daily bond cycle. That places bonds very deep in there timing band for forming a daily cycle low. So the formation of a swing low has good odds of marking the daily cycle low. A break above 120.47 will form a daily swing low. And a break above the declining trend line will confirm the new daily cycle.

Bonds had established a daily uptrend prior to their daily cycle decline. Bonds managed to not close below the lower daily cycle band during its daily cycle decline, therefore maintaining its daily uptrend. Bond will remain in its daily uptrend unless it closes below the lower daily cycle band.