Cycle Trading

Stocks closed lower on Thursday, calling into question if day 32 was the daily cycle low.

Stocks printed their lowest point last Thursday, which was day 32, to place stocks in their timing band for a daily cycle low. Stocks went on to form a swing low and close above the 10 day MA to have us label day 32 as the daily cycle low. But then stocks closed lower on Thursday …

There are three things that make me wonder whether or not day 32 was the daily cycle low. The 1st concern is the 10 day MA did not turn decisively lower. Normally during a decline into a cycle low the 10 day MA breaks noticeably lower. The 2nd concern is the bearish divergence on the True Strength Indicator. And the 3rd concern is the RSI turning lower. During an advancing phase of the intermediate cycle RSI tends to stay overbought for extended periods of time. The RSI reversed this time without even being oversold. That change in behavior by itself is a warning signal. When combined with the other signals, it has me wondering if stocks are still declining into their daily cycle low.