Cycle Trading

Stocks peaked on day 27 and has been in decline since. With Monday being day 36 for the daily equity cycle that places stocks solidly in their timing band to print a daily cycle low.

Monday’s bullish reversal eases the parameters for forming a daily swing low. A break above 2430.58 will form a swing low to signal a new daily cycle. However stocks printed 285 million Selling on Strength on Monday.

It is common enough to see Buying on Weakness days begin to accumulate as stocks near a cycle bottom. What is not common is to see more Selling on Strength days as the cycle bottom nears. So even though stocks printed a bullish reversal on Monday, the Selling on Strength number is a signal that stocks will continue lower and perhaps break below the previous daily cycle low. If that happened that would form a failed daily cycle and would allow stocks to complete their intermediate cycle decline.

Gold also showed up Monday on Selling on Strength.

Gold printed a bearish reversal on Friday. Although gold did close higher on Monday, gold did manage to form a daily swing high.

Monday was day 30 for the daily gold cycle. That places gold in its timing band to seek out its daily cycle low. Add to that that gold also managed to form a daily swing high and it is clear that cycle top signals are beginning to add up. A break below the daily cycle trend line should send gold to seek out its daily cycle low. Gold has been closing above the upper daily cycle band indicating that gold is in a daily uptrend. If gold can form its daily swing low without closing below the lower daily cycle band then gold will remain in its daily uptrend and that swing low will represent a buying opportunity.