Cycle Trading

Stocks regained the 10 day MA on Tuesday signaling that day 36 did host the DCL. A break above the declining trend line is necessary to confirm the new daily cycle.

Stocks closed below the lower daily cycle band on the way to printing its day 36 low. Closing below the lower daily cycle band usually indicates that the intermediate cycle is in decline. However, the day 36 low did not break below the previous daily cycle low to form a failed daily cycle. So stocks did not confirm an intermediate cycle decline. Other indices have formed failed daily cycles confirming an intermediate cycle decline. That suggests that the S&P just may have been too bullish to form a failed daily cycle.

The Russell did form a failed daily cycle to confirm an intermediate cycle decline.

The Russell broke below the lower daily cycle band in early August to signal the intermediate cycle decline. The Russell broke below the previous daily cycle low on August 9th to form a failed daily cycle, confirming the intermediate cycle decline.

The Russell appears to have printed its daily cycle low on day 31. It has since rallied and is on the verge of confirming the new daily cycle once it breaks above the declining trend line. Then a close above the upper daily cycle band will signal a new intermediate cycle.

Biotech has confirmed its new daily cycle …

Biotech also formed a failed daily cycle, confirming its intermediate cycle decline. It printed its daily cycle low on day 31 and has since broke above the declining trend line to confirm the new daily cycle. Biotech has also closed above the upper daily cycle band which indicates that the intermediate cycle low has been set.

In the Mid-Week Update I plan to further discuss the possibility that stocks are leaving behind an intermediate cycle low.