Cycle Trading

Some fear that stocks have entered a bear market. I believe that stocks are emerging from an intermediate cycle low and just successfully retested those lows. The decline into Friday looked in realtime like a left translated, failed daily cycle was unfolding. But Monday’s swing low signals a new daily cycle. A break of the declining trend line will have us label Friday as an early DCL.

While both the transports and the banks did break lower, they did not sell off as deeply as stocks. And both have already recovered their respective 10 day MA’s leading the way for stocks to follow.

And the NYMO gives us reason for more bullish conviction.

We have discussed previously how the NYMO delivered the most powerful thrust out of a cycle low since the 2016 4 year cycle low. We can see that while stocks did test the recent low, there is a huge bullish divergence emerging on the NYMO that signals a rally is to follow.