Cycle Trading

Summary

• Stocks rolled over from 6900 and formed a swing high on Monday

• Bearish follow-through Wednesday closed price below the 10 day moving average

• Loss of the 10 day moving average signals the daily cycle decline

• Day 25 places stocks inside the timing band for a DCL

• Additional downside over the next 5–10 days remains possible

• Stocks remain in a daily uptrend unless the lower daily cycle band is broken

Stocks formed a swing high on Monday and rolled over below the 6900 level, confirming that upside momentum was beginning to stall. As discussed in the prior post, consolidation near resistance raised the risk of a left-translated daily cycle — and Wednesday’s action pushed the market further in that direction.

Stocks delivered bearish follow-through on Wednesday by closing below the 10 day moving average, signaling the start of the daily cycle decline. Wednesday marked day 25 of the daily cycle, placing stocks in the early part of their timing band for a daily cycle low (DCL). From here, it would not be unusual to see prices trend lower for another 5–10 days as the cycle works toward completion.

As part of that process, stocks should turn the 10 day moving average lower in order to fully satisfy the requirements for a daily cycle decline. Until that occurs, downside risk remains elevated.

Importantly, stocks are still in a daily uptrend. That uptrend will remain intact unless stocks close below the lower daily cycle band. A decisive break below that band would end the daily uptrend and shift the focus to a larger trend transition.

For now, the loss of the 10 day moving average confirms that the market is no longer consolidating — it is actively cycling lower. The key question over the coming sessions is whether this decline remains contained within the context of a larger uptrend, or whether it evolves into something more consequential.