Cycle Trading

Tuesday was day 40 for the daily equity cycle. That places stocks squarely in their timing band to decline into a daily cycle low. Stocks delivered some bearish signals on Tuesday.

One of the bearish signals was a bearish crossover on the True Strength Indicator. Another bearish signal was the red candle that formed a lower low.

The lower low that formed on Tuesday eases the parameters for forming a swing high. A break below 2768.64 will form a daily swing high. Then a break below the accelerated (blue dashed) trend line will indicate that stocks are declining into the daily cycle low. Once stocks begin their daily cycle decline we should see stocks break below the (black) daily cycle trend line in order to complete their daily cycle decline.

Stocks are in a daily uptrend. They will remain in their uptrend unless they close below the lower daily cycle band. Therefore if a swing low forms above the lower daily cycle band that will indicate a continuation of the daily uptrend.