Cycle Trading

Stocks rallied out of the March daily cycle low to tag the 50 day MA on Friday. Stocks formed a swing high on Monday and then closed blow the 10 day MA on Tuesday. The question is — what are the odds that stocks have begun their decline into their daily cycle low?

Over the past 3 years there has been 18 daily cycle, both left translated and right translated. Only 2 daily cycles out of 18 peaked under 30 days — which is 11%. So there is an 88% chance that stocks will make one more push higher before rolling over into a daily cycle decline. If stocks form a swing low off of Tuesday’s candle, then we will be able to construct the daily cycle trend line. But a close below the lower daily cycle will be our signal that stocks are declining into their daily cycle low.