Cycle Trading

Bear Case:

Stocks formed a bearish engulfing candle on Thursday to close below the 10 day MA.  Stocks delivered be bearish follow through on Friday forming a swing high.

The decline into the day 35 low in July did not turn the 10 day MA lower, so it is not clear if Friday was day 12 of a new daily cycle or day 47 of a stretched daily cycle.  We will be watching the rising 50 day MA for possible support for the DCL to form.  If stocks deliver more bearish follow through to close below the 50 MA — that would shift the odds towards day 35 being the DCL, placing stocks in a failed daily cycle.

Bull Case:

Notice that stocks tested the lower daily cycle band on Friday and reversed. Since stocks are currently in a daily uptrend, we will label Friday as day 47.  If stocks form a swing low and close back above the 10 day MA that will indicate a continuation of their daily uptrend and signal a cycle band buy signal. A break above 6287.28 will form a swing low.