Cycle Trading

Stocks broke out to a new daily cycle high on Tuesday.

Not only did stocks break out to a new daily cycle high, they also broke above the previous daily cycle high to continue the pattern of higher highs and higher lows. However, stocks also delivered another bearish signal on Tuesday.

Stocks printed 625 million Selling on Strength on Tuesday. This is the 3rd large SOS day since stocks printed their daily cycle low. And that gives me 2 concerns. First off it is not typical to see large Selling on Strength days early in a daily cycle. And second, we typically see a clustering of SOS days near cycle turning point. And while the daily cycle is only on day 7, the intermediate cycle is on week 22. That places stocks in their timing band for an intermediate cycle decline. And these are the type of SOS days that are more associated with an intermediate cycle decline. So we need to be prepared for a left translated daily cycle formation that will lead to the intermediate cycle decline.