Cycle Trading

Stocks have been consolidating for the past 9 trading days just below the 200 day MA.

Stocks were clearly rejected by the 200 day MA back in August which sent stocks into a failed daily cycle to extend their intermediate cycle decline.

Tuesday is day 28 for the daily cycle, placing stocks in the early part of their timing band for a DCL. There is a chance that stocks will again be rejected by the 200 day MA – which would then send stocks into a daily cycle decline. With a peak on day 23 – that assures us of a right translated daily cycle which indicates a higher low.

However, stocks could deliver a bullish surprise and breakout above the 200 day MA. Typically breakouts that occur later in the timing band for a DCL is rarely sustained. If stocks break above the 200 day MA here, a daily cycle decline that backtests the 200 day MA would likely be needed before a trending move to be sustained.