Cycle Trading

Prior to Thursday, stocks printed their lowest point on Tuesday, day 27, placing them in the early part of their timing band for a daily cycle low (DCL). Stocks quickly responded by forming a swing low on Wednesday. A close above the 10 day moving average would have allowed us to label day 27 as the DCL.

Then came the catalyst: Nvidia reported a strong earnings beat Wednesday evening, along with a better-than-expected revenue outlook for the fourth quarter. This set the stage for stocks to open solidly green on Thursday — and early on, they did exactly that. At one point, stocks pushed above the converging 10 day moving average and 50 day moving average, temporarily signaling day 27 as the DCL.

But the breakout didn’t hold.

Stocks were rejected by those converging moving averages and reversed sharply, closing down 1.56% on the day. More importantly, stocks closed below the previous DCL on Thursday. Closing below the prior DCL forms a failed daily cycle— and that confirms the intermediate cycle decline is underway.

Stocks are now firmly in a daily downtrend. Thursday’s rejection at the 10 day and 50 day moving averages only reinforces that trend and signals a cycle band sell signal. For now, the burden remains on the bulls to show evidence of stabilization.

In the Weekend Report, we’ll dig into what this failed cycle means for the broader intermediate trend and how long these declines typically run.