Cycle Trading

We discussed on Tuesday that the bullish reversal on day 25 set up the possibility of a shortened daily cycle. Instead stocks look to be extending their intermediate cycle decline.

Thursday was day 28 for the daily equity cycle. Stocks closed convincingly below the lower daily cycle band. Closing below the lower daily cycle band signals that stocks are in an intermediate cycle decline.

After printing the week 24 low stocks did form a weekly swing low and close above the 10 week MA. These are signals of a new intermediate cycle. But stocks never turned the 10 week MA higher. And after the Thursday’s drop the 10 week MA has turned lower. Which is another indication that the intermediate cycle has stretched to week 30. Since a cycle low is the lowest point following the cycle peak, stocks will need to break below the week 24 low of 2532.69 in order to complete their intermediate cycle decline.