Cycle Trading

Stocks recovered the 200 day MA and the 10 day MA on Monday.

We will use the close above the 200 day moving average to label day 53 as the DCL. Stock should go on to turn the 10 day MA higher as it rallies out of its DCL. Since the 10 day MA was declining rather steeply prior to the day 53 low, stocks may need to consolidate along the 200 day MA to allow the 10 day MA to flatten to before it can turn higher.

It has been 23 weeks since stocks formed their last intermediate cycle low. The question is if the day 53 low is not only a DCL but the ICL as well. Typically we see a failed daily cycle as stocks decline into their the intermediate cycle low — which did not happen since the day 53 low is higher than the late December low. Which means that there is a strong possibility that this new daily cycle will left translated and fail in order to complete the intermediate cycle decline.

In the Weekend Report I plan to discuss what stocks would need to do convince me that the day 53 low was not only the daily cycle low, but the intermediate cycle low as well.