Cycle Trading

After dropping 2.71% on Friday to signal the daily cycle decline, stocks rallied on Monday. Friday was day 28, placing stocks in their timing band for a DCL. Stocks closed below the 10 day MA and turned the 10 day MA lower on Friday so technically stocks “did enough” for a DCL to form. Stocks will need to form a swing low and close back above the 10 day MA in order to label day 28 as the DCL. Stocks would have to rally another 1.62% to break above the day 28 high of 6762.40 in order to form a swing low. So, if day 28 ends up being the DCL, there was a longer term concern that developed on Friday. Stocks closed below the lower daily cycle band on Friday. Closing below the lower daily cycle band ends the daily uptrend and begins a daily downtrend. Closing below the lower daily cycle band also indicates that intermediate cycle decline has begun — which is something that I plan to discuss in the Weekend Report.