Cycle Trading

Stocks broke lower on Thursday. Breaking below Tuesday’s low extends the daily cycle decline.

Since emerging from the last yearly cycle low the daily equity cycle has averaged 40 days from trough to trough. So with Thursday being day 57, that places stocks deep in their timing band for a daily cycle low. And there are bullish divergences beginning to develop on the oscillators which often accompany a cycle low. And after a huge 3.75% drop there is real panic out there. We are getting close to a daily cycle low.

Stocks are also getting close to an intermediate cycle low.

The intermediate cycle has averaged 23.2 weeks since emerging from the 2009 low. The intermediate cycle peaked on week 22 and the formed a weekly swing high last week. This week stocks broke convincingly below the weekly trend line to confirm the intermediate cycle decline. And at 24 weeks that places stocks right in their timing band for their intermediate cycle low.

Therefore once the daily cycle low is confirmed, it will also likely mark the intermediate cycle low.