Cycle Trading

I think that there is no doubt that stocks declined into a multi year low.


As evidenced above, we had a bearish spike lower in the NYHL that also occurred at previous 4 year lows, confirming the decline into a multi-year low.

The real question is — is still some downside or did stocks print their multi-year low?

Three concerns that the multi-year low has not yet formed.
1) Timing Band for Multi-Year Low
2) Stocks began a monthly downtrend.
3) 2.7 billion SOS early after the cycle low.

1. Multi- year lows normally form every 44 months and December was only month 34



2. Stocks closed below the lower monthly cycle band – beginning a monthly downtrend.



3. During the first 5 days of the rally stocks had 2.7 billion selling on strength.
Times that stocks printed these type of numbers after emerging out of a cycle low lead to lower lows …

However evidence that the 4 year low is in.

1) Alternating multi-year cycle lengths
2) Monthly RSI has already turned higher
3) NHYL bullish cross

1. The multi-year equity cycle tends to alternate a long cycle with a short cycle.
And stocks could be due for a shortened multi-year cycle.



2. Monthly RSI has turned up already.
During an uptrend, RSI does not stay oversold for very long. And as we can see, the monthly RSI has already turned higher.



3. NYHL bullish cross
As we noted the first chart, the NYHL has spiked down to a level that has only been seen at previous multi-year cycle lows. The NYHL has not only recovered, but has delivered a bullish cross above the declining trend line.

Here is what we need to see to confirm that the multi-year low is in.
* Regaining the 200 day MA
* Right translating the new intermediate (weekly) cycle
* Closing above the upper monthly cycle band.