Cycle Trading

Summary

• Stocks formed a swing low on Thursday after closing below the 50 day moving average on Wednesday
• Day 12 peak suggests left-translated cycle remains a threat
• Bulls must reclaim and hold the 10 day moving average
• Failure to do so risks resuming the daily downtrend
• A close back under the 50 day moving average would trigger a cycle band sell signal

Stocks broke bearishly out of consolidation on Tuesday and then closed below the 50 day moving average on Wednesday, day 16, signaling the start of the daily cycle decline. A peak on day 12 suggests the potential for a left-translated daily cycle that would align with continued downside risk.

However, Thursday delivered a bullish surprise. Stocks rallied 0.79%, forming a swing low and reclaiming the 50 day moving average. That recovery opens the door for a half cycle low to form on day 16 — if bulls can follow through.

The technical pivot remains clear.

• A close back above the 10 day moving average would help confirm a half cycle low and support further upside.
• A rejection by the 10 day moving average followed by a close back below the 50 day moving average would signal continuation of the daily downtrend and confirm a cycle band sell signal.
• At this point, the burden remains on the bulls to reverse downside momentum and prevent further left-translation.