Cycle Trading

Stocks closed below the 10 day MA on Friday. Friday was day 30, placing stocks in their timing band for a daily cycle low. And for reasons that we discussed here on Tuesday, I do not think that day 30 was the daily cycle low.

And stocks delivered more signals on Thursday of a pending daily cycle decline.

One of the signals delivered on Thursday was the bearish TSI divergence. Despite stocks closing at all-time highs there is a bearish divergence developing on the True Strength Indicator.

Another signal on Thursday was the alarmingly large SOS number. As we discussed on Tuesday, stocks printed a huge 777 million Selling on Strength on Tuesday. While the S.O.S. is not a precision tool, we have now received a second larger Selling on Strength signal on Thursday. Stocks printed a huge 1093 million Selling on Strength number on Thursday. This is the type of number usually associated with an intermediate cycle decline. So stocks have now delivered repeated SOS signals while in the timing band for a cycle decline. This increases the odds of a cycle decline.

I also believe something more sinister than a daily cycle decline is unfolding, which I plan to discuss in the Weekend Report.