Cycle Trading

Summary

• Stocks have been consolidating below 6900 ahead of Wednesday’s Fed announcement
• A rate cut is expected, but markets fear Powell may pause future cuts
• Stocks remain in a daily uptrend
• Bullish breakout = continuation of uptrend + cycle band buy signal
• Swing high on day 9 heightens risk of left-translated cycle
• Bearish break below the 10 day MA could extend the intermediate cycle decline

Stocks have been coiling beneath the 6900 level for more than a week as the market waits for clarity from the Fed. The FOMC kicked off its two-day meeting on Tuesday, and Fed Chair Powell is widely expected to announce an interest rate cut on Wednesday. But the key question for markets isn’t Wednesday’s cut — it’s what comes next.

There’s growing concern that Powell may signal a pause in future cuts, which would challenge the bullish narrative that’s been supporting equities into the new daily cycle.

Stocks remain in a daily uptrend, and a bullish breakout from this consolidation would signal a continuation of that uptrend and trigger a cycle band buy signal.

However, stocks also formed a swing high this week. With a current peak on day 9, a bearish break from consolidation— especially a close below the 10 day moving average — would set stocks up for a left-translated daily cycle formation, raising the odds that the intermediate cycle decline could extend.

The Fed’s message on Wednesday will likely determine which path unfolds.