Cycle Trading

The S&P, the Russell and the Transports are all forming right translated daily cycles. Right translated daily cycles trend higher in a stair step fashion.

All 3 are getting late in their timing bands for a daily cycle low. Both the Russell and the transports have delivered a recognizable correction while the S&P has only formed a swing high. If there has been a change in character, as we discussed here, then we may not see much in the way of a correction for the S&P. However, all three remain in a daily uptrend. So if a swing low forms above the lower daily cycle band the correction strategy is to buy the dip. That is because once an asset is in a daily uptrend, they will remain so until they close below the lower daily cycle band.

Energy stocks have also formed a right translated daily cycle.

XLE peaked on day 27 and has since been slowly working its way into its daily cycle low. A peak on day 27 assures us of a right translated daily cycle formation. XLE printed its lowest point on Thursday, following the day 27 peak. That places XLE deep in its timing band for a DCL. At this point a swing low and close back above the 10 day MA will confirm a new daily cycle. XLE has begun a new daily uptend. It will continue in its uptrend until it closes below the lower daily cycle band.