Cycle Trading

Stocks broke below the daily cycle trend line on Tuesday.

To recap – stocks peaked on day 39. They formed a swing high and closed below the 10 day MA on day 42, which placed stocks in their timing band for a daily cycle low. Stocks went on to form a swing low on Thursday and closed at new all time highs on Friday. And in this environment of massive global liquidity it looked, in real time, as if that was all the daily cycle decline we would see.

Then stocks formed a swing high and closed back below the 10 day MA on Monday. They delivered bearish follow through by breaking below the daily cycle trend line on Tuesday. Since there is no way that the daily cycle topped on day 3, that makes Tuesday day 47 for the daily equity cycle.

Stocks are even deeper in their timing band for a daily cycle low. A swing low and close back above the 10 day MA will signal a new daily cycle. Stocks continue to be in a daily uptrend. Therefore if stocks form their swing low above the lower daily cycle band then they will remain in their daily uptrend and trigger a cycle band buy signal.