Cycle Trading

Stocks have been on a great run, printing a new daily cycle high on Tuesday, day 36 .

36 days places stocks in their timing band for a daily cycle decline. It does not mean that stocks will all of the sudden begin to drop. But it does mean that with each passing day, the likelihood of stocks rolling over into a daily cycle decline becomes greater.

So even though stocks are still printing new daily cycle highs and are just over 1% from their all time highs, energy is beginning to outperform.

The above chart measures XLE performance verses the S & P. 

A closer look show that Energy broke above the declining trend line and backtested it on Tuesday, suggesting that we will begin to see a rotation into energy going forward.