Cycle Trading

Stocks remain volatile. There are reasons to be bullish and reasons to be bearish.

Reasons to be bullish:
* The 10/29 cycle low placed stocks very deep in the timing band for an intermediate cycle low. Stocks are due for a multi-week rally.
* The initial thrust out of that low was the most powerful thrust out of a cycle low since the 2016 multi cycle low, which we discussed here.
* There is a bullish RSI pattern that is developing.
* The True Strength Indicator is trending higher.

Bearish concerns:
* Stocks are in a daily downtrend.
* Stocks have closed below both the 200 day MA and the 10 day MA.
* By closing lower on Monday, stocks have caused the 10 day MA to begin to turn lower.

One more reason to be bullish
* Stocks remain above the daily cycle trend line.
After peaking on day 7 stocks broke lower forming a pivot on day 13. The swing low that formed off the day 13 candle allowed us to construct the daily cycle trend line. While stocks did close lower on Monday, they remained above the newly constructed trend line. If stocks can form another swing here, that would give stocks the chance to regain the 10 DMA and the 200 DMA. However, if stocks break lower here and close below the daily cycle trend line, then that would signal a left translated daily cycle formation and a continuation of the intermediate cycle decline.

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