Cycle Trading

Stocks formed a swing high which broke below the daily cycle trend line to indicate that they have begun its daily cycle decline. Thursday was day 38 for the daily equity cycle, placing stocks in their timing band for a daily cycle low. Stocks also closed below the 10 day MA, which is another confirmation of the daily cycle decline. Stocks should continue lower in order to turn the 10 day MA lower before printing its daily cycle low.

However stocks formed reversal on Thursday that sets up a bullish possibility. Thursday’s bullish reversal eases the parameters for forming a swing low. A break above 2931.68 would form a swing low to have us consider that day 38 was the DCL.

At this point I would prefer to see stocks sell off for another 5 to 7 days which would help to turn sentiment bearish. We need to keep in mind that stocks have been closing above the upper daily cycle band in a strong daily uptrend. So if a swing low forms here then stocks would remain in its daily uptrend and trigger a cycle band buy signal.